Amaranth Plans to Stay in Play Without Energy

Hedge fund Amaranth Advisors, which lost about $6 billion trading natural gas futures this month, said it planned to stay in business but had sworn off energy trading.

Amaranth founder Nicholas Maounis told investors Friday on a conference call that the firm was putting together a plan for investor redemptions and would disclose it soon.

“We have every intention of continuing in business and generating for our investors the same consistently high-risk adjusted returns which have been our hallmark, and we are fully committed to doing so,” Maounis said. “As a first step in the recovery process, we are eliminating energy trading from our strategy mix.”

Amaranth said Thursday that its portfolio, worth $9.2 million on Aug. 31, lost 65% in value after bad bets on natural gas prices and the subsequent sale of its energy portfolio.

Amaranth’s implosion is one of the biggest hedge fund losses and comes as fund investment has poured into energy markets. Hot on the heels of the July failure of New York hedge fund MotherRock, which was forced to shut down because of bad natural gas bets, the Amaranth debacle has once again shone the spotlight on the issue of regulation of hedge fund trades. Still, it has caused barely a ripple in other financial markets.

The last week has been a painful one, Maounis said, adding that the fund managers have lost a lot of their own money.

“We feel bad about losing our own money. We feel much worse about losing your money,” he said.

Although Maounis didn’t name the buyer of its energy portfolio, people familiar with the deal have said it was bought by JPMorgan Chase & Co. and Chicago-based hedge fund Citadel Investments.

Citigroup Inc. was reportedly in talks to buy a stake in Amaranth. In the conference call, Maounis didn’t raise the issue.