HedgeCo.Net (New York) – Hedge fund Amaranth Advisers made a disastrous bet on natural gas prices that produced losses of $4 to $6 billion, once among the nation’s largest and hottest hedge funds, the hedge fund scrambled in an effort last week “aggressively reducing” their natural gas positions, the hedge fund said in a letter to investors.

Amarath did have due warning though; according to sources, the New York Mercantile Exchange warned the hedge fund a month before its extreme losses that its natural gas bets were too big.

U.S. lawmakers say Amaranth’s loss is the biggest ever by a hedge fund and is a good example a problem they are facing. Lawmakers complained that speculators were raising energy prices and avoiding oversight with trades that were not conducted on exchanges.

Amaranth, based in Greenwich, Connecticut, with $7.5bn under management, has warned investors that its main funds are down 35% or more this year. Nicholas Maounis, Amaranth’s founder, said in a letter to investors,
“We are in discussions with our prime brokers and are working to protect our investors while meeting the obligations of our creditors,”

Traders said Amaranth could cause some volatility by moving quickly to liquidate holdings to meet margin calls and possible investor redemptions. Amaranth, which employs more than 115 traders, analysts and fund managers, describes itself as a multi strategy hedge fund which invests in a “highly disciplined, risk controlled manner.”

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net