Brian Hunter - Chasing the Bonus

When studying the stories of successful traders who motivate us to push through and not give up halfway, it's crucial not to ignore the stories of major failures and unsuccessful traders.
Of course, to stay motivated, you need to look up to the best, but it's the stories of failures that show how thin the line is between a losing and a profitable trader, and how one mistake can turn not only your world upside down, but the world of others, team members, investors, and even the entire financial sector.

Brian Hunter's story is a prime example of greed and avarice leading to irreparable consequences, with his mistake leading to the largest hedge fund collapse ever.

To understand the nature of what happened, I suggest reading the history of what happened more carefully.
Brian Hunter was born into an ordinary Canadian family of concrete pourers in Alberta. There are virtually no facts known about the trader's childhood and youth. The only thing known is that Brian Hunter began his trading career shortly before the September 11 terrorist attacks and joined the renowned Deutsche Bank.

First successes and failures

Upon joining Deutsche Bank, his primary role was trading natural gas. The goal of virtually every bank and hedge fund is to minimize risk while achieving acceptable returns. During his first few years, Brian Hunter excelled at this task and earned a healthy commission for his work.

Thus, according to some estimates, Brian Hunter earned his bank approximately $30 million in his first few years, and his department became one of the organization's leading ones. However, a year after this meteoric rise, Brian Hunter and his department lost $51.2 million on Christmas Eve, completely erasing all the gains of the previous two years. 

For this failure, the company's management decided to deprive the trader of his bonus, but he, in turn, filed a lawsuit against the company and lost resoundingly.

Second Chance. Working at Amaranth Advisors

Brian Hunter later joined Amaranth Advisors. Following his interview, Brian convinced management that the loss at Deutsche Bank was entirely predictable and that his gas operations were long-term.

In fact, the company believed in the manager's strategy and allowed the company to continue working with natural gas.

Brian Hunter's first year at Amaranth Advisors was so successful that by the end of it, he had earned $100 million in commissions, and the fund itself had earned just over a billion dollars. Hunter bet on rising gas prices, as Hurricane Katrina had just recently passed through and Hurricane Rita was approaching.

The consequences, which included disruption of production levels in the Gulf of Mexico, led to a huge increase in the price of the natural resource and a very rapid enrichment of Brian Hunter as a trader.

Hunter was later fined $7 million for manipulating gas prices on the stock market, but this sum was dwarfed by the potential profit.

The collapse of Amaranth Advisors

Buoyed by a successful end to the year, Brian Hunter tried to repeat his record and made a huge bet on rising gas prices in 2006. Unfortunately, for Hunter, that year was quite good for the gas production industry, so the price fell sharply.

Since the gas market is considered low liquidity, Hunter attempted to reverse the market by adding billions of dollars to his purchases. He might have succeeded, but at the same time, trader John Arnold of the Centaurus fund acted as a counterparty and actively sold gas, aiming to reverse the market downwards.

Ultimately, due to the lack of fundamentals, Brian lost the unequal battle with the market and wiped out Amaranth Advisors' hedge fund by six and a half billion dollars. This event went down in history as the largest hedge fund collapse. Meanwhile, his counterparty, John Arnold, profited from Hunter's foolishness by a whopping two billion dollars.

In 2007, after the worst crash in history, Brian Hunter founded his hedge fund and successfully continued its activities, attracting 1 billion in investments.