John D. Arnold

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John D. Arnold
Born John Douglas Arnold
1974 (age 39–40)
Occupation Investor, former hedge fund manager
Net worth Increase $2.8 billion (March 2013)[1]
Spouse(s) Laura Muñoz
Children 3

John Douglas Arnold (born 1974) is an American billionaire and former hedge fund manager who specialized in natural gas trading. His firm, Centaurus Advisors, LLC, was a Houston-based hedge fund that specialized in trading energy products.[2][3] Arnold announced his retirement from running the hedge fund on May 2, 2012.[4][5][6][7][8]

Early life[edit]

Arnold was raised in an upper class family in Dallas, Texas, the younger of two sons. He has one older brother, Matthew, who also traded at Enron.[4] His father was a lawyer and his mother worked as an accountant at Arnold's Centaurus.[4][9] His father died when Arnold was 17.[4][9] In 1995, he graduated from Vanderbilt University with a degree in mathematics and economics.[9] He is a Lambda Chi Alpha.[10]

Career[edit]

Enron[edit]

After college, he began his career at Enron as an oil analyst but was soon promoted to assistant trader.[9] In 1996, he moved over to the Natural Gas Desk upon the departure of Jeff Bussan[citation needed] and started trading natural gas derivatives.[9] Using their new Internet-based trading network, EnronOnline,[citation needed] he is credited with making three quarters of a billion dollars for Enron in 2001 and was rewarded with an $8 million bonus.[9][11] One of his former colleagues dubbed him "king of natural gas."[12][13][14]

Centaurus[edit]

When Enron collapsed in 2002, he founded Centaurus with his previous year's bonus. His company now has as much as $3 billion in assets under management.[15] His employees include several big name energy traders including Greg Whalley,[11] as well as Bill Perkins, Mike Maggi, and Conrad Goerl, previously of MotherRock.[16]

According to Arnold, "After Enron collapsed, there was a general revaluation of credit risk among energy companies. The better credits were less willing to take on the lesser credits as counter parties. So the lesser credits found themselves with fewer counter parties willing to trade with them, even though they still needed to hedge the pricing risks in their business. Hedge funds previously had not been involved in the over-the-counter market, except for the very largest, because the other participants were reluctant to grant credit to that type of entity."[17]

During the collapse of Amaranth Advisors, Centaurus is widely credited as being one of the major players on the other side of their position, and returning as much as 150% in 2005.[18]

At a recent energy conference, Arnold stated that he looks "to place bets on a market that he determines is 'biased'... we ask ourselves can we identify what is forcing a market to price a product at an unfair value, and then, what will push it back to fair value." Arnold also referred to the speculative trading that was taking place on the unregulated over-the-counter Intercontinental Exchange (ICE) and NYMEX's Clearport Trading: "Trading never went away... what has changed is the non-commercial type of interest... because of this there has never been as much investor interest as there is today."[19][20]

During August 2008, Centaurus acquired around 10% of the shares of National Coal Corporation (NCOC).[21]

Arnold gave a public speech to the U.S. Commodity Futures Trading Commission (CFTC), in which he opposed limits on financially settled trading positions but supported limits in the physical energy futures as they near expiration. Arnold said, "I try to buy things whenever they're trading below what [our] analysis shows to be fair value and sell things whenever our analysis shows that the forward curve is higher than our analysis of fair value." [22][23][24]

Philanthropy[edit]

"In 2010, the Arnolds signed the Giving Pledge, a commitment taken by the world's wealthiest individuals and families to give away half of their wealth to philanthropy or charitable causes."[25] In 2011, Arnold donated over $100 million to different causes[26][27] including the Laura and John Arnold Foundation which they founded. In 2012, they gave away or pledged $423 million.[28]

The Laura and John Arnold Foundation states that it focuses on three main areas: criminal justice, education, and public accountability. On June 26, 2012, the Foundation launched the ERIN Project, a powerful tool to help analyze the national K-12 education landscape[29] and on August 15, 2012, the Foundation launched the Giving Library to offer philanthropists an innovative way to enhance their strategic giving.[30] On July 1, 2013, the New Jersey Attorney General, Anne Milgram, and the foundation launched a data driven risk management electronic system to assist employees of the Criminal Justice department in their decision making.[31]

During the United States federal government shutdown of 2013, the foundation announced that it would be donating $10 million in emergency funds to the Head Start program so that some 7,000 kids from low-income families could continue to receive educational services.[25][32][33] The programs were at risk because their Federal grants were up for renewal after October 1.[25] The federal government reinstated Head Start funding in a deal approved by Congress on January 13, 2014.[34]

Arnold has funded various politically-oriented 501(c)4 organizations, including Engage Rhode Island.[35] Many of these organizations advocate pension fund reform, encourage state and local governments to reduce benefits to workers and to invest assets in riskier investments such as hedge funds.[36] Some have criticized his efforts, saying that hedge fund managers, such as himself, collect generous sums in fees for managing the funds, while the workers are left with reduced pensions.[37][38][39]

Personal life[edit]

Arnold is married to Laura Elena (Muñoz) Arnold. Laura Arnold is co-chair of the Laura and John Arnold Foundation, and was formerly an attorney in Houston, Texas and an oil company executive. She is a graduate of Harvard College, Yale Law School and has a Master of Philosophy degree in European Studies from the University of Cambridge.[40] They have three children.[41]

References[edit]

  1. ^ Forbes: The World's Billionaires - John Arnold March 2013
  2. ^ Ahmed, Azam (2012-05-03). "John Arnold Is Said to Close Hedge Fund and Return Investor Money". The New York Times. Retrieved 2013-10-08. 
  3. ^ Kumar, Nishant (2013-05-02). "Hedge fund Centaurus to return cash, shut Asia office: source". Reuters. Retrieved 2013-10-08. 
  4. ^ a b c d "When a billionaire trader loses his edge - The Term Sheet: Fortune's deals blogTerm Sheet". Finance.fortune.cnn.com. 2012-05-04. Retrieved 2013-10-08. 
  5. ^ "Houston billionaire trader John Arnold retiring at 38 - Houston Chronicle". Chron.com. 2012-05-02. Retrieved 2013-10-08. 
  6. ^ Kate Kelly (2012-05-02). "Legendary Energy Trader John Arnold to Retire". Cnbc.com. Retrieved 2013-10-08. 
  7. ^ Kroll, Luisa. "Hedge Fund Billionaire John Arnold's Fund Was Up When He Announced He Was Getting Out". Forbes. Retrieved 2013-10-08. 
  8. ^ "Ex-Trader at Enron to Retire From Hedge Fund - WSJ.com". Online.wsj.com. Retrieved 2013-10-08. 
  9. ^ a b c d e f New York Times: "CORPORATE CONDUCT: THE TRADER; Enron Trader Had a Year To Boast of, Even If..." By DAVID BARBOZA July 09, 2002
  10. ^ "Lambda Chi Alpha - Notable Alumni". lambdachi.org. 2013-08-14. Retrieved 2013-10-08. 
  11. ^ a b New York Times, "Energy Trading, Post-Enron", January 15, 2006
  12. ^ "'King of Natural Gas' John Arnold retiring". MarketWatch. Retrieved 2013-10-08. 
  13. ^ Vardi, Nathan. "The King Of Natural Gas Quits". Forbes. Retrieved 2013-10-08. 
  14. ^ Demos, Telis (2009-11-24). "Centaurus's John Arnold: The king of natural gas - Nov. 24, 2009". Money.cnn.com. Retrieved 2013-10-08. 
  15. ^ [1][dead link]
  16. ^ "The energy-trading high wire - Pittsburgh Post-Gazette". Post-gazette.com. 2006-03-21. Retrieved 2013-10-08. 
  17. ^ "Futures & Options Trading for Risk Management - CME Group". Nymex.com. Retrieved 2013-10-08. 
  18. ^ Tett, Gillian (2006-12-20). "Smart trades that made this a good year for some". FT.com. Retrieved 2013-10-08. 
  19. ^ "Gas and Oil Speculation". Levin.senate.gov. Retrieved 2013-10-08. 
  20. ^ ""The Role of Market Speculation in Rising Oil and Gas Prices: A Need To Put The Cop Back On The Beat"". Hsgac.senate.gov. Retrieved 2013-10-08. 
  21. ^ Houston Business Journal, "Centaurus scoops up National Coal shares" August 29, 2008
  22. ^ Demos, Telis (2009-11-24). "Centaurus's John Arnold: The king of natural gas - Nov. 24, 2009". Money.cnn.com. Retrieved 2013-10-08. 
  23. ^ "Energy Trading Mogul Warns on Trading Limits". The New York Times. 2009-08-05. Retrieved 2013-10-08. 
  24. ^ ""John D. Arnold's CFTC (U.S. Commodity Futures Trading Commission) speech"". Cftc.gov. Retrieved 2013-10-08. 
  25. ^ a b c Emma, Caitlin (October 7, 2013). "Philanthropists pledge $10 million to restore 7,000 Head Start seats". Politico. Retrieved October 10, 2013. 
  26. ^ "The Chronicle of Philanthropy"
  27. ^ "The Chronicle of Philanthropy"
  28. ^ "The New Science of Giving". Wall Street Journal. May 17, 2013.
  29. ^ "Laura and John Arnold Foundation Launches Powerful K-12 Education Tool". Dallas Business Journal. 2012-06-26. Retrieved 2013-10-08. 
  30. ^ Kroll, Luisa (August 14, 2012). "Billionaire John Arnold And His Wife Launch Giving Library". Forbes. Retrieved 2013-10-08. 
  31. ^ Milgram, Anne (October 2013), Why smart statistics are the key to fighting crime 
  32. ^ October 8, 2013, 8:58 AM (2013-08-23). "Laura and John Arnold donate $10 million to help Head Start amid government shutdown". CBS News. Retrieved 2013-10-08. 
  33. ^ Cherkis, Jason (2013-10-07). "Head Start Back In Business Thanks To Private Donation In Wake Of Government Shutdown". Huffingtonpost.com. Retrieved 2013-10-08. 
  34. ^ Frias, Jordan (2/3/2014). "Head Start Funding to Be Reinstated in Boston, Nationally". Boston Urban News. Retrieved 9 July 2014. 
  35. ^ "Matt Taibbi on How Wall Street Hedge Funds Are Looting the Pension Funds of Public Workers"
  36. ^ "Looting the Pension Funds: How Wall Street Robs Public Workers | Politics News". Rolling Stone. 2013-09-26. Retrieved 2013-10-08. 
  37. ^ Preston, Caroline (2011-10-16). "A Thirtysomething Billionaire Couple’s Bold Philanthropy - About Donors - The Chronicle of Philanthropy- Connecting the nonprofit world with news, jobs, and ideas". Philanthropy.com. Retrieved 2013-10-08. 
  38. ^ Reid, Tim (2013-06-25). "Texas hedge fund billionaire seeks California pension reform". Reuters. Retrieved 2013-10-08. 
  39. ^ "A closer look at the Texas billionaire who backed EngageRI | WPRI.com Blogs". Blogs.wpri.com. 2013-05-20. Retrieved 2013-10-08. 
  40. ^ Baylor College of Medicine: "Laura Arnold named to BCM Board of Trustees" by Lori Williams September 26, 2008
  41. ^ "Our Team | Laura and John Arnold Foundation". Arnoldfoundation.org. Retrieved 2013-10-08. 

External links[edit]