Amaranth Founder Maounis to Start New Multistrategy Hedge Fund

Date: Monday, May 12, 2008
Author: Katherine Burton, Bloomberg.com

May 9 (Bloomberg) -- Nicholas Maounis, the hedge-fund manager whose Amaranth Advisors LLC collapsed under a record $6.6 billion loss in 2006, is seeking to start a new firm, according to a note sent today to his former investors.

``Many of you have inquired as to my future plans,'' Maounis wrote. ``I welcome the opportunity to speak with you personally about my new venture.''

Maounis plans to open Greenwich, Connecticut-based Verition Fund Management LLC later this year with more than $200 million, according to two former investors briefed on the venture. Clients with money in Amaranth when it shut down won't pay incentive fees for three years, said the investors, who asked not to be identified because the fund is private. While the fund won't charge a management fee, all investors will pay the fund's expenses.

Verition, derived from the Latin word for truth, will start with three strategies: quantitative, which uses computer models to pick trades; bonds and loans; and special situations, focusing on convertible bonds issued by companies going through corporate events such as mergers. Maounis declined to comment.

Maounis, 44, a former convertible-bond trader, opened Greenwich-based Amaranth in September 2000 with $600 million. His goal was to build a firm like Kenneth Griffin's $20 billion Citadel Investment Group LLC in Chicago, which uses multiple strategies to trade securities including stocks, bonds, currencies and commodities. By August 2006, Amaranth's assets had climbed to about $9.5 billion.

Brian Hunter

In September of that year, bets on natural gas made by trader Brian Hunter lost about $4.6 billion in one week. By month's end, the losses had risen to $6.6 billion, the most ever by a hedge fund, resulting in a 60 percent loss for 2006. Amaranth investors have received 93 percent of their remaining money back, the note said.

Hedge funds, private investment pools, typically charge 2 percent of assets as a management fee and 20 percent of any profits as an incentive fee.

Hunter started Solengo Capital Advisors six months after Amaranth's collapse. The assets were acquired last year by Peak Ridge Capital Group Inc., a Boston-based private-equity firm, which hired Hunter to advise its commodity fund. Peak Ridge Commodity Volatility Fund gained 49 percent in the first quarter, two investors said last month.

To contact the reporter on this story:
[bn:PRSN=1] Katherine Burton [] in New York at 
kburton@bloomberg.net