Amaranth rips Pension Fund: "You knew the risks!"

http://dealbook.blogs.nytimes.com/2007/06/07/amaranth-to-pension-fund-you-knew-the-risks/

Amaranth to Pension Fund: You Knew the Risks
June 7, 2007, 2:18 pm

Amaranth Advisors has a response for managers of San Diego County’s pension fund, who are smarting over big losses they took when the hedge fund collapsed. It goes something like this: We warned you.

In a court filing seeking to dismiss the pension fund’s lawsuit against it, Amaranth said Thursday that the fund’s officers “knew exactly what they were getting into” when they invested in the now-defunct fund.

What the county got into, however, turned out to be a sea of red ink after Amaranth lost about $6.6 billion in the course of a few days last fall. After its energy trades went bad, the fund was forced to shut down in what was the largest-ever collapse of a hedge fund.

Amaranth’s collapse prompted some lawmakers to call for greater oversight of hedge funds, which are lightly regulated investment pools usually restricted to institutional and wealthy investors. Some in Congress have said they are especially leery of public employees’ pension-fund assets being invested in hedge funds.

Now, the San Diego County Employees Retirement Association is seeking damages of $150 million based on its $175 million worth of investments with Amaranth. In its lawsuit filed in United States District Court in Manhattan, the pension fund accuses Amaranth of failing to adequately disclose risks and that it made “excessively risky and volatile investments.”

Amaranth answered some of those claims Thursday in a 49-page motion filed by lawyers at Winston & Strawn. (The Wall Street Journal’s Law Blog notes that Nicholas Maounis, who founded Amaranth, has hired star litigator David Boies to represent him personally in the matter.)

The fund, which was based in Greenwich, Conn., said it spelled out the risks to potential investors in “painstaking detail” in warnings that were repeated “over and over again,” sometimes in bold or all capital letters. It said the pension fund’s officers “were consciously investing in speculative and leveraged investment strategies involving volatile and illiquid markets without any diversification requirements.”

“Simply put,” the motion states, the county “took a known risk and lost money.”

 

well, they are right. everybody loves the blame game when it comes from profiting from lawsuits.