Amaranth hedge fund estimates losses at $6B US

A Connecticut hedge fund that bet heavily on the natural gas market lost almost $6 billion USover the past month, partly because it sold other assets at a loss to stay afloat while its gas investments plummeted, the fund told investors in a letter.

Greenwich-based Amaranth Advisors, which is also embroiled in a dispute over the direction of Toronto-based Cinram International Income Fund, said in a letter late Wednesday that the fund lost about 55 per cent of its year-to-date assets, and about 65 per cent month-to-date as of Tuesday.

That is higher than the estimated 35 per cent year-to-date loss announced earlier this week and it leaves the hedge fund's assets below $3.5 billion.

The company, which opened the year with $7.4 billion, hit an August high of $9.2 billion before a slide in the value of natural gas investments depleted much of its assets.

It announced Wednesday that it had transferred its energy portfolio to a third party, but has not identified it.

Company founder and chief executive officer Nick Maounis told the hedge fund's investors in his letter that selling off some assets in the fund's other portfolios, along with the transfer of its energy portfolio, "helped us avoid the termination of our credit facilities and the risk of a consequent forced liquidation by our creditors."

'Defining the future'

The hedge fund's officials plan a conference call Friday with investors and will schedule one-on-one discussions, his letter said.

"We are now focused on communicating with our investors and defining the future of our business," Maounis wrote. "Amaranth is determined to earn back its investors' trust, and one step towards that end is to share as much information as we reasonably can. We assure you that we are eager to do so."

Reports Wednesday said high-level executives of the company, including star energy trader Brian Hunter of Calgary, have been in Greenwich trying to unwind contracts and deal with angry business partners.

Hedge funds have much higher minimum investments than mutual funds and typically are much more active traders. Hedge funds can use techniques off limits to mutual funds, such as shorting stocks and commodities, essentially betting they will fall.

Cinram International's board has sparred publicly with Amaranth, the company's largest investor with a 15 per cent stake, by refusing calls to put Cinram up for sale.

Cinram is the world's largest provider of pre-recorded multimedia products, such as music, video and software on DVDs and CDs, and related logistics services.