Amaranth Investors Wait For Redemption

It remains far from clear how the Amaranth Advisors debacle will play out. Latest word, according to Dow Jones Newswires, is that the Greenwich, Conn.-based hedge fund manager may either liquidate its assets or sell itself to a larger institution.

It remains far from clear how the Amaranth Advisors debacle will play out. Latest word, according to Dow Jones Newswires, is that the Greenwich, Conn.-based hedge fund manager may either liquidate its assets or sell itself to a larger institution. This comes after founder Nick Maounis announced that Amaranth intends to stay in business. If the firm intends to keep running, investors who want to pick up the pieces of their decimated investment may be in for a long wait. Maounis has acknowledged there have been “substantial” requests to recover investments, but Amaranth won’t have to worry about a run on the remaining money, thanks to long lock-up periods introduced when the firm was a hot commodity, just a few months ago. Investors in Amaranth Multi-Strategy after Feb.1 are committed for 25 months, which means not before March 2008. Those who invested before Feb. 1 were able to withdraw at the end of a quarter as long as they gave 45 days written advance notice, but the most they could collectively pull from the fund is 7.5% of its total assets, according to documents cited by MarketWatch, and that could come with a 2.5% redemption fee on top of it. MarketWatch also reports that Amaranth used “side pockets,” through which the HF manager put some $15 million in “designated investments” (read: more illiquid), and investors in those vehicles can’t redeem their part until the designated investment is sold. Other than announcing there would be a redemption plan “soon,” Mauonis has provided few details, saying, “Given the fluid situation, we are evaluating what is best for all investors in a manner consistent with our fiduciary obligations and will keep you informed of our progress.” Brian White, CEO of the San Diego County Employee Retirement Pension Fund, is among those who will have to sweat it out, after requesting a redemption Monday. His fund had invested about $175 million in Amaranth last year, and now has to swallow a loss of $87 million, almost double what was originally thought. The good news, if there is any, is that pensioners were not expected to be affected, according to media reports.