Hedge-fund burnt by wrong bets on natural gas

A US hedge-fund company has imploded after making wrong-way bets on natural gas, losing about US$6 billion ($9.12 billion).

Amaranth Advisors said its losses swelled by US$1.4 billion this week because the firm had to unload assets at a discount to avoid a shutdown.

The company had assets valued at US$9.5 billion last month. But their value has plunged 65 per cent due to a fall in gas prices, leaving the company with less than US$3.5 billion in assets.

Amaranth's risky plays in the natural gas market had reaped big rewards in the past, but have been badly hit by the fall in prices over the past few weeks, analysts said.

The Connecticut-based firm has transferred energy trades to other investors and sold securities to forestall being shut.

In a letter to investors the company said it "continued to meet all margins calls", or loan repayment demands.

Citadel Investment Group and JPMorgan Chase & Co, Amaranth's clearing broker, took over the energy positions, reports say.

New York-based Citigroup was in negotiations and if a deal is made Amaranth would become part of the Citigroup division that oversees US$42 billion in hedge-fund, private-equity and real estate assets.

- BLOOMBERG / REUTERS