Now Amaranth's losses are up to $6 billion.
WSJ.com - Amaranth Chief Expresses Regret In Conference Call With Investors: BY RANDALL SMITH: September 22, 2006 3:42 p.m.: Seeking to explain the loss of $6 billion this month, Amaranth Advisors founder and chief executive Nick Maounis expressed regret over the fund's ill-fated energy bet in a brief call with investors. In a 15-minute call that began at 2:00 p.m EDT today, Mr. Maounis said the past week's events "have been painful for all of us." He added, "We lost a lot of our own money this month. We lost even more of yours.... We feel bad about losing our money…and even worse about losing yours."
He said Amaranth traders had been surprised not only by adverse market moves, but also by the lack of ability to exit their losing positions. He said the fund had been subject to "a series of unusual and unpredictable events" that triggered "dramatic losses." And, he said, "the markets provided no viable means to exit."
Based in Greenwich, Conn., the hedge-fund firm is fighting for its survival after informing investors this week that it lost 65% of its assets, primarily at the hands of a 32-year-old natural gas trader. With investors fearing more losses and clamoring to withdraw their money, the fund has offloaded its energy portfolio to J.P. Morgan Chase & Co. and hedge fund Citadel Investment Group LLC and sold what it called a "a significant number" of other investments. It also is negotiating to sell at least a stake of itself to Citigroup Inc. Amaranth told investors in a Wednesday letter that the moves helped "avoid the termination of our credit" and a "forced liquidation by our creditors."...
Mr. Maounis told The Wall Street Journal on Aug. 29, less than three weeks before disclosing the losses, that Mr. Hunter's reputation for taking big, reckless bets was "greatly exaggerated." The fund had built "infrastructure around our traders so we can adequately assess risk," Mr. Maounis said then.... In today's call with investors, Amaranth CEO Nick Maounis said the fund plans to continue in business, but will eliminate energy trading from its trading strategies.
Through August, the Amaranth executive said, the fund had racked up more than $2 billion in energy and commodities trading profits. But once news of its $500 million losses "began to sweep through the markets" after September 14, he said, the "illiquidity" of the markets prompted two unsuccessful attempts to offload its natural-gas exposures in separate transactions.
Mr. Maounis said Ameranth is "evaluating" the redemption requests it has received, but gave no assurance about when such requests would be met. "We understand, of course, that the issue of redemptions is a high priority for you." And he vowed to contact investors individually over the next few weeks.
"We have no illusions about the difficulty of the road ahead," the Amaranth executive said. "We are determined to earn back your faith," he concluded, thanking listeners "for your time and patience."
Aren't these people paid extraordinarily high fees because they claim to know how asset prices and positions will react to the unexpected, and which positions in which markets can be exited easily in times of uncertainty and which cannot?