Published:
September 30, 2006
Nicholas Maounis, the
founder of the hedge fund, sent a letter to investors last night informing them
that the fund was suspending all redemptions for Sept. 30 and Oct. 31, to
“enable the Amaranth funds to generate liquidity for investors in an orderly
fashion, with the goal of maximizing the proceeds of asset dispositions.”
Investors have met with Amaranth throughout the week, many demanding the
return of their money. “As you know, the multistrategy
funds have recently received substantial redemption requests,” Mr. Maounis said in the letter.
The letter represents a turnabout for Mr. Maounis,
who just a week ago expressed hope at the end of a conference call that he
would be able to continue the fund’s operations. “We have every intention of
continuing in business, generating for our investors the same consistently high
risk-adjusted returns which have been our hallmark,” he said on Sept. 22.
When investors are allowed to take money out of the fund, redemption fees
and charges will be waived, the letter said. Cash distributions will be divvied
up proportionately.
The fund has lost $6.4 billion, according to the letter, which said assets
were down 65 to 70 percent for the month and 55 to 60 percent for the year.
Amaranth started the year with $7.5 billion and then soared to $9.2 billion
before stumbling to less than $3 billion today.
Amaranth’s energy desk, run by a young trader, Brian Hunter, bet
aggressively on natural gas. When certain prices fell this month, the fund
found itself in positions too big to liquidate. Ultimately, it was forced to
sell its energy holdings when some of its counterparties threatened to cut off
its credit. J.
P. Morgan Chase and Citadel Investments, another hedge fund, bought the
book of energy trades for an undisclosed price, although Amaranth said the sale
was done at a loss.
At different points, the fund was in discussions with buyers, including Citigroup,
to possibly acquire some of the remaining assets. But with investors clamoring
to get their money back, such a sale would be difficult. Amaranth said it
continued to “pursue negotiations but have no announcement at this time,” a
signal many investors took to mean any potential sale was off.
The letter said Amaranth planned to remain in business but was not certain
what it would do. A spokesman for the fund, which is based in