Amaranth Advisors is indicating that it intends to stay in business and do right by its investors, but there appears to be a little insult to the injury thanks to a firm policy. Despite losing 65% of its assets in the past week or so, the Greenwich, Conn.-based hedge fund manager was likely not to see mass redemptions because 60% of its investors are funds of hedge funds and have a one-year commitment. Nevertheless, Amaranth founder Nicolas Maounis told investors in a conference call Friday that the firm is working on a redemption plan that should be ready “soon.” More important, however, was his announcement about the firm’s future. “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,” he said, adding this not-so-shocking shocker: “As a first step in the recovery process, we are eliminating energy trading from our strategy mix.” That is good news for investors, but there may be one little thorn in the side of investors. Financial News reports that unlike many other hedge funds, Amaranth has no “high water mark.” When a hedge fund has one - and many of them do - investors don’t have to pay performance fees until the HF recoups losses. At Amaranth, it could mean in spite of their losses, investors will have to start paying performances fees of 20% as soon as the firm starts making money again. That may not be far off. With the sale of its energy portfolio - reportedly to JPMorgan Chase and Citadel Investment Group - Amaranth may be back on its feet sooner than anyone would predict. Amaranth reportedly will begin one-on-one meetings with investors to explain the current situation.
