Amaranth Hires Fortress Investment to Sell Assets

Date: Sunday, October 1, 2006
Author: Katherine Burton, Bloomberg.com

Oct. 1 (Bloomberg) -- Amaranth Advisors LLC, the hedge-fund manager that lost $6.5 billion betting on natural gas, hired Fortress Investment Group LLC to help sell assets as it seeks to honor clients' requests for their money back.

Advisory fees will be paid by Amaranth, not its two main funds, the Greenwich, Connecticut-based firm said today in a statement. Terms weren't disclosed.

The amount investors eventually receive depends on how effectively the funds' holdings are liquidated by Amaranth and Fortress Investment, a New York-based firm that oversees $24 billion. Amaranth said Sept. 29 it had suspended client redemptions to allow it to unload about $3 billion in remaining investments.

Fortress Investment will provide Amaranth with ``an independent perspective, as well as potential strategic support,'' Nicholas Maounis, 43, Amaranth's chief executive officer, said today in the statement.

Amaranth, a Greek word meaning ``never fading,'' imploded two weeks ago after making wrong-way bets on the direction of natural-gas prices. Its funds tumbled as much as 70 percent from a peak of $9.5 billion at the end of August, the most costly collapse ever for hedge-fund investors.

The firm last month gave up its natural-gas trades to Citadel Investment Group LLC and JPMorgan Chase & Co. and sold other investments to avoid being shutdown by creditors. Talks to sell some or all of its assets to Citigroup Inc., the largest U.S. bank, broke down two days ago.

Shawn Pattison, an Amaranth spokesman, declined to comment. Lilly Donohue, a managing director at Fortress, couldn't immediately be reached for comment.

Impenetrable Fortress

Fortress Investment manages private-equity funds, real estate, hedge funds and distressed debt. It was founded in 1998 by Wesley Edens, Robert Kauffman and Randal Nardone, who previously worked together at BlackRock Asset Investors, a New York-based private-equity fund.

The firm discloses few details about its investments. It once held $270 million in loans to singer Michael Jackson, secured in part by his 50 percent ownership of the Beatles song catalog. Jackson restructured the debt in April as part of an agreement with Sony Corp., which owns the other half of the catalog.

Hedge funds are largely unregistered pools of capital that let managers participate substantially in gains on the money invested. There are more than 8,000 hedge funds with $1.2 trillion in assets, more than double the figure five years ago, according to Hedge Fund Research Inc. in Chicago.

Amaranth's meltdown capped a tumultuous month for the industry. More than two weeks ago, regulators in the U.S. and Malaysia began investigating Mount Kisco, New York-based Aeneas Capital Management LP after bad bets on Malaysian stocks caused losses of about 60 percent in one of its funds.

Last week, Pirate Capital LLC, which oversees $1.7 billion, said half of its 10-member investment team quit.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net