Amaranth to Cut About 60% of Workers as It Liquidates

Date: Friday, October 6, 2006
Author: Jenny Strasburg & Katherine Burton, Bloomberg.com

Oct. 6 (Bloomberg) -- Amaranth Advisors LLC, the hedge-fund manager that's liquidating after losing $6.5 billion betting on natural gas, plans to cut about 60 percent of its workforce within a week.

As many as 250 of Amaranth's 420 workers will be dismissed, said Charlie Winkler, the company's chief operating officer, yesterday in a statement. Amaranth is contacting more than 50 financial firms, including hedge fund companies Citadel Investment Group LLC, SAC Capital Advisors LLC and Pequot Capital Management Inc., to find employees new jobs.

Amaranth is dismantling after its two main funds fell as much as 70 percent in September, the most costly collapse ever for hedge-fund investors. The Greenwich, Connecticut-based company said it's seeking an orderly process to limit disruption as it sells about $3 billion of remaining assets and returns proceeds to investors. Amaranth wants rivals to hold off contacting its employees so they can help with the shutdown.

``I know many of you have been contacted directly by employees, but more likely by recruiters,'' wrote Stanley Friedman, Amaranth's managing director for human resources, in an Oct. 4 e-mail sent to rival hedge funds and investment companies. ``If you work through us, you won't have a fee associated with your hire.''

Redemption Requests

``Most of the employees will get reabsorbed,'' said Henry Higdon, managing partner of New York-based Higdon Partners LLC, an executive-search firm for the asset-management industry. ``The senior people may be tainted.''

Amaranth founder Nicholas Maounis, 43, told investors in a Sept. 29 letter that recent redemption requests won't be met. That means investors have to wait at least several more weeks to withdraw money.

Funds managed by Amaranth plunged as natural-gas prices dropped 26 percent in August and another 7 percent in September on the New York Mercantile Exchange. The trader responsible for Amaranth's natural-gas investments was Brian Hunter, who no longer works at the firm. As of June 30, energy trades accounted for about half the capital of the Amaranth funds.

Clients of Amaranth, a Greek word that means ``never fading,'' included funds run by New York-based Morgan Stanley, Goldman Sachs Group Inc. and Bank of New York Co., and Deutsche Bank AG of Frankfurt. Other investors were St. Paul, Minnesota- based 3M Co., maker of products ranging from Post-it Notes to electronic road signs, and the San Diego County Employees Retirement Association.

Greenwich to Singapore

Amaranth's effort to sell part or all of the firm to New York-based Citigroup Inc., the biggest U.S. bank, broke down last week. Amaranth has hired Fortress Investment Group LLC, the New York-based company that oversees $24 billion in private equity, hedge funds, real estate and distressed debt, to help sell assets.

Hedge funds are largely unregistered pools of capital that let managers participate substantially in gains on investments. There are more than 8,900 hedge funds with a combined $1.2 trillion in assets, more than double the figure five years ago, according to Hedge Fund Research Inc. in Chicago.

Some of the industry's biggest managers have been underperforming the markets in recent months. The Vega Select Opportunities hedge fund, known for making bets on bonds, received redemption requests for as much as $400 million after falling almost 11 percent last month, said investors in the fund.

Vega Funds

Vega Select started September with $1 billion of assets, down from $2.2 billion at the end of 2004, said two investors, who declined to be identified because the information isn't public. The fund is the biggest at Vega Asset Management LLC, whose assets have dropped to about $3 billion from a peak of $12 billion in 2004.

Amaranth has 353 people in Greenwich, 26 in London, 18 in Toronto, 11 in Singapore, nine in Calgary and three in Houston, according to Friedman's e-mail. The firm offered to provide employees' resumes and space in its offices for interviews.

Whole and partial teams of employees, including portfolio managers, are available, though some of the firm's investment professionals have already started their own job searches, the e-mail said.

To contact the reporters on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net ; Katherine Burton in New York at kburton@bloomberg.net