Oct. 2 (Bloomberg) -- Amaranth Advisors LLC, seeking to return what's left of clients' money after losing $6.5 billion on natural-gas bets, hired Fortress Investment Group LLC to help sell its hedge-fund holdings.

Fortress was brought in ``with the goal of maximizing value for our investors,'' said Nicholas Maounis, 43, founder of Greenwich, Connecticut-based Amaranth yesterday in a statement.

Amaranth is trying to prevent its collapse, the largest in hedge-fund history, from becoming more costly for investors. The amount they get back depends on how effectively the $3 billion in assets held by the firm's two main funds are liquidated.

Amaranth's meltdown capped a tumultuous month for the industry. Regulators in the U.S. and Malaysia began investigating Aeneas Capital Management LP of Mount Kisco, New York, more than two weeks ago after bad bets on Malaysian stocks caused losses of about 60 percent in one of its funds. Pirate Capital LLC, which oversees $1.7 billion, said last week that half of its 10-member investment team quit.

Hedge funds are largely unregistered pools of capital that let managers participate substantially in gains on the money invested. There are more than 8,000 hedge funds with $1.2 trillion in assets, more than double the figure five years ago, according to Hedge Fund Research Inc. in Chicago.

Greek Word

Fortress, a New York-based company that oversees $24 billion in private equity, hedge funds, real estate and distressed debt, will be paid by Amaranth, not by the funds' investors, Maounis said. Terms weren't disclosed.

Amaranth, a Greek word meaning ``never fading,'' imploded two weeks ago after making wrong-way trades on the direction of natural-gas prices. Its funds tumbled as much as 70 percent from a peak of $9.5 billion at the end of August.

Maounis, in a Sept. 29 letter to investors, said his firm has received ``substantial redemption requests'' and investors would have to wait for their money. That would give Amaranth time to sell investments on more favorable terms.

Amaranth last month gave up its natural-gas trades to Citadel Investment Group LLC and JPMorgan Chase & Co., and sold other investments to avoid being shut down by creditors. Talks to sell part or all of the firm to New York-based Citigroup Inc., the largest U.S. bank, broke down two days ago.

Shawn Pattison, an Amaranth spokesman, declined to comment. Lilly Donohue, a managing director at Fortress, didn't return a phone call seeking comment.

Impenetrable Fortress

Maounis said in the letter that his company was talking to other firms about ``potential strategic alliances that would enable the continued operation of the Amaranth platform.'' It's unclear whether Fortress will take on any of Amaranth's investment teams, or play a role other than helping in the sale.

Peter Briger Jr., a Fortress principal, said in yesterday's statement that his firm will work Amaranth ``to preserve the value of the platform that they have created.''

Fortress was founded in 1998 by Wesley Edens, Robert Kauffman and Randal Nardone, who previously worked together at BlackRock Asset Investors, a New York-based private-equity fund.

The firm, which discloses few details about its investments, once held $270 million in loans to singer Michael Jackson secured in part by his 50 percent ownership of the Beatles song catalog. Jackson restructured the debt in April as part of an agreement with Sony Corp., which owns the other half of the catalog.

Whistler Mountain

Fortress agreed in August to buy Intrawest Corp., which owns resorts including Whistler Blackcomb Mountain, for $1.8 billion. Fortress's portfolio also includes Brookdale Senior Housing in Chicago, which provides housing and assisted living to 1.9 million seniors; and Gagfah, Germany's fourth-largest residential housing company.

It also has invested in mobile-phone tower operator Global Signal Inc. to help lead the Sarasota, Florida-based company's turnaround after it filed for bankruptcy in 2002.

Edens runs the firm's private-equity investments. Kauffman oversees European activities, while Nardone is head of its legal and structured-finance units. Briger, a former Goldman Sachs Group Inc. partner, oversees distressed-debt investments, and Michael Novogratz coordinates global macro strategies at the firm's hedge-fund unit.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

Last Updated: October 2, 2006 01:38 EDT