Amaranth Hits Back At Pension Adversary

Jun 18 2007 | 12:44pm ET

A California pension fund knew what it was getting into, and has no one to blame but itself for losing much of its investment with Amaranth Advisors, the going-out-of-business hedge fund says.

In seeking the dismissal of a lawsuit filed by the San Diego County Employees Retirement Association—remarkably, the only suit filed against the Greenwich, Conn.-based firm over its $6 billion in natural-gas trading losses last year—Amaranth said its disclosure documents made clear the risks involved. The agreement the association signed explicitly stated, “The fund is a speculative investment that involves risk, including the risk of losing all or substantially all of the amount invested.”

SDCERA has invested $175 million with Amaranth in 2005. It has since recouped some $73 million, but filed suit against the firm in March anyway, seeking $150 million plus damages.

In its motion, filed in federal court in New York, Amaranth portrays SDCERA’s move as sour grapes.

“Simply put,” the motion says, “SDCERA took a known risk and lost money. It now seeks to recover both its initial investment, and unrealized profits earned through the speculation that this lawsuit decries.”

The pension, of course, sees it differently, arguing that Amaranth, which at its peek managed $9 billion, indicated that it invested in at least six different sectors and had sophisticated risk-management systems in place.

“Just because they gave us lengthy disclosure statements, it doesn’t give them a license to steal,” SDCERA CEO Brian White told the San Diego Business Journal.

Amaranth and its founder, Nicholas Maounis, have warned that SDCERA’s lawsuit will both delay its plan to return its remaining assets to investors, as well as deplete what’s left. Making good on that promise, the firm has hired a pair of high-profile law firms, Winston & Strawn and Boies, Schiller & Flexner, to defend itself.


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