San Diego County Fund Sues Amaranth

March 30, 2007 ( - The San Diego County Employees Retirement Association (SDCERA) has sued Amaranth Advisors, LLC, three of its officers, and its former natural gas trader, to recover losses suffered by the pension plan in the Amaranth Partners, LLC hedge fund.

The lawsuit was filed in the U.S. District Court for the Southern District of New York on March 29, 2007 against Amaranth Advisors (the advisor of the hedge fund), Chief Investment Officer Nicholas Maounis, Chief Operating Officer Charles Winkler, Chief Risk Officer Robert Jones, and the fund’s former trader Brian Hunter.

The $7.2 billion SDCERA reportedly lost about $175 million in the collapse of the Amaranth hedge fund.   As of January 16, 2007, the fund said it had received approximately $48.2 million in partial distributions (s ee San Diego County Fund Gets $48M Repaid in Amaranth Collapse ) .   Bloomberg reports that the fund has thus far received $60 million from Amaranth’s liquidation and expects another $15 million, according to an interview with Brian White, SDCERA’s chief executive officer, said in an interview yesterday. The pension fund sued after negotiations to get more money back failed, he said, according to the report.

According to a press release, SDCERA’s suit – which is seeking damages of at least $150 million – claims that the fund was injured “as a result of excessive and unbridled speculation in natural gas futures that was directly contrary to statements made to SDCERA that Amaranth would be diversified and risk controlled.”

David Myers, Chairman of SDCERA’s Board of Trustees, said, “We invested in Amaranth because Mr. Maounis and the other officers of Amaranth told us that a team of highly experienced professionals would carefully manage our pension funds. Instead, as we state in the suit, they turned our money over to Mr. Hunter, who in my opinion was an absentee rookie trader located thousands of miles from Amaranth’s office.”

Amaranth Collapse

Last September, Amaranth lost about $4.6 billion in 2006 on bad wagers on natural-gas prices. This left it down about 35%, or $2.6 billion, for the year (See  San Diego Retirement Fund to Feel Hit from Hedge Fund Collapse ) in what was the largest hedge fund failure to date.

SDCERA’s suit alleges that Hunter, who has since left the firm (see  Former Amaranth Adviser Ready to Try Again ), made bet-the-fund natural gas investments that were more concentrated, volatile, leveraged, and illiquid than represented.  

For its part, Amaranth said fighting the lawsuit, the first tied to the largest-ever hedge-fund failure, will drain remaining assets earmarked for investors, according to Bloomberg.

The case is San Diego County Employees Retirement Association v. Nicholas Maounis, Charles Winkler, Robert Jones, Brian Hunter and Amaranth Advisors LLC, U.S. District Court, Southern District of New York (Manhattan).

SDCERA is an independent association established by California’s County Employees Retirement Law of 1937, which governs 20 California county retirement systems. SDCERAprovides retirement benefits for approximately 35,000 eligible public employees, former public