John D. Arnold Biography

John Douglas Arnold, born in 1974, is an American hedge fund manager, specializing in natural gas trading. His firm, Centaurus Advisors, LLC, is a Houston-based hedge fund that specializes in trading energy products. John announced his retirement from running the hedge fund on May 2, 2012.

Early life and education

Arnold was raised in a middle-class family in Dallas, the younger of two sons. His father was a lawyer and his mother was an accountant. His father died when he was 16. In 1995, he graduated from Vanderbilt University in three years with a degree in mathematics and economics. He is a brother of Lambda Chi Alpha Fraternity.

Career

Enron

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

Centaurus

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. His employees include several big name energy traders including former Enron CEO Greg Whalley, as well as Bill Perkins, Mike Maggi, and Conrad Goerl, previously of MotherRock.

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."

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.

At a recent energy conference, Arnold stated that he looks "to place bets on a market that he determines is ?biased' ... [W]e 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 ... [W]hat has changed is the non-commercial type of interest ... [B]ecause of this there has never been as much investor interest ... as there is today."

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

John D. Arnold recently made a rare public speech to the CFTC (U.S. Commodity Futures Trading Commission), in which he opposed limits on financially settled trading positions but supported limits in the physical energy futures as they near expiration. As Arnold told the CFTC, "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."

In 2009, John Arnold is believed to have made $900 million.

Philanthropy

In 2011, he and his wife donated over $100 million to different causes including the Laura and John Arnold Foundation which they founded. In 2012 they gave away or pledged $423 million.

The Laura and John Foundation claims to focus 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 and on August 15, 2012, the Foundation launched the Giving Library to offer philanthropists an innovative way to enhance their strategic giving.

In addition to traditional philanthropic activities, Arnold has partially funded various politically-oriented 501(c)4 organizations (e.g., Engage Rhode Island). Many of the these organization 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. 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.

Personal life

Arnold is married to Laura Elena Muñoz who serves as president of the Arnold Family Foundation. Muñoz is a magna cum laude graduate of Harvard College, a graduate of Yale Law School, and has a master's of philosophy in European Studies from the University of Cambridge. They have three children.