Amaranth Investors May Not See Money Soon

Date: Tuesday, September 26, 2006
Author: HFN Daily Report

Investors in troubled hedge fund Amaranth could have their money locked up for some time.

According to a report by Financial News, the Greenwich-based fund has stringent restrictions on redeeming capital, including a limit of 7.5% that can be paid out of its total funds each quarter. The limit has never been reached in the past, but if all the investors headed for the gate at once, and if Amaranth stuck to that limit, it could take three to four years before all investors got their money out, the paper said.

After Amaranth lost an estimated $6 billion following a bad bet on natural gas, rumors circulated the fund would be closing. Since then, fund founder Nicholas Maounis has said the fund has every intention of staying in business and wants to regain investor trust.

In remarks to investors on Friday, Maounis said he would be meeting one-on-one with investors and evaluating what is best for each of them. Maounis said he understood the issue of redemptions is a high priority for investors and Amaranth hoped to have a plan for them shortly.

Since Amaranth's troubles were revealed last week, it has come to light that a number of pension funds invested with the fund, including Caisse de Depot et Placement du Quebec, the largest pension fund in Canada. Despite the fact the pension had CAN$77.3 million ($69.3 million) with Amaranth, Caisse head Henri-Paul Rousseau has said he will not cut the pension's allocation to hedge funds.

Another Canadian pension fund, the Ontario Teachers' Pension Plan, had a small exposure to Amaranth, but was fortunate enough to sell those holdings this summer before the fund encountered massive losses.

A number of pensions invested with Amaranth through funds-of-funds, including pension plans for Pennsylvania and New Jersey. The largest hit taken by a public pension fund seems to be that for San Diego county employees, which invested $175 million with Amaranth.