Sept. 22 (Bloomberg) -- Amaranth Advisors LLC, the hedge- fund company that lost $6 billion betting on natural-gas prices, has ``every intention'' of staying in business, founder Nicholas Maounis told investors.

Maounis blamed the losses, including a $560 million plunge on Sept. 14, on market moves the firm's traders had considered a ``highly remote'' possibility. Amaranth, which now has about $3.5 billion in assets, hasn't decided how to handle clients' requests for their money, Maounis, 43, said on a conference call today.

``I think investors all exit,'' said George Lucaci, senior managing director with New York-based Channel Capital Group, which operates the HedgeFund.net database.

Amaranth, based in Greenwich, Connecticut, this week sold its energy trades and other investments to avoid being shut down by creditors after its two main funds plunged 65 percent since the end of August. The firm has been in talks to sell a stake to Citigroup Inc., the largest U.S. bank, which wants to expand its hedge-fund business. It's the largest hedge fund to be crippled by bad bets since Long-Term Capital Management LP in 1998.

The U.S. Securities and Exchange Commission opened a probe of Amaranth, three people with direct knowledge of the inquiry said. The agency's enforcement unit is looking into whether Amaranth misled investors, brokers and lenders about its losses or its practices to guard against them, said the people, who declined to be named because the probe isn't public.

John Nester, an SEC spokesman in Washington, declined to comment.

No Questions

Hedge funds are private partnerships catering to rich investors and institutions. They endeavor to profit regardless of how financial markets fare. There are more than 8,000 hedge funds with $1.2 trillion in assets, according to Hedge Fund Research Inc. in Chicago.

Energy was Amaranth's biggest market bet, accounting for $2.17 billion of profits this year through Aug. 31, and $1.26 billion last year, Maounis said on the call.

Maounis, who started Amaranth in 2000, spoke for less than 15 minutes and didn't take questions. He said the firm's two main funds, which are down 55 percent for the year, won't make any more energy investments.

Those trades, which in June accounted for more than 50 percent of the funds' capital, were ``fully consistent'' with their ``multi-strategy'' investment style, he said. Maounis made his name as a trader in convertible bonds at Paloma Partners.

Investors said they had expected more information from Amaranth, named after an imaginary flower that never fades.

In the Dark

``I'm really not any further enlightened than I was before the call,'' said David Deutsch, chief investment officer for the $7.2 billion San Diego County Employees Retirement Association, which had $175 million invested in Amaranth.

Maounis said after losing money on the energy portfolio in May, the firm decided to ``reduce its exposures opportunistically.'' Still, energy bets earned $1.35 billion for investors from June to August, with a significant portion of that coming last month, Maounis said.

Chicago-based Citadel Investment Group LLC, the $12 billion hedge-fund firm run by Kenneth Griffin, and JPMorgan Chase & Co., the No. 3 U.S. bank, have taken over Amaranth's energy positions. Amaranth transferred them at ``significant losses,'' Maounis said in a letter to investors two days ago.

On the call, he said Amaranth has met all demands for repayment of loans it used to finance the trades.

Investors said the funds, Amaranth International and Amaranth Partners, wagered that the difference between futures prices for natural gas in the summer and winter months would continue to get larger, a trend that's held since at least the beginning of 2004. Futures are contracts to buy or sell a commodity on a specific date at a preset price.

Overstaying the Position

Instead, the spread collapsed. The difference in price between the 2007 March and April contracts for natural gas peaked in July at $2.60. That shrunk to $1.15 by the end of last week. The spread between the two was about 60 cents today on the New York Mercantile Exchange.

Spreads between March and April contracts in 2008, 2009 and later have also collapsed.

``What happened to that hedge fund shows that when you're really right, you always overstay the position and that's when you get murdered,'' Peter Bernstein, author of `Against the Gods: The Remarkable Story of Risk,' said today in a telephone interview. ``It's better not to be right so much.''

After the $560 million on Sept. 14, the firm worked ``around the clock'' to transfer its positions. Discussions took place with two parties over the weekend, but fell through. Citadel and JPMorgan agreed to take over the positions on Sept. 19.

RAM Energy Resources Inc. said today it bought 739,175 of its own shares from Amaranth at a discount to market rates. The shares had a market value of $3.47 million at yesterday's closing price of $4.70.

Shares of Tulsa, Oklahoma-based RAM, which explores for and develops oil and natural-gas properties, gained 21 cents, or 4.5 percent, to $4.91 at 4:30 p.m. in Nasdaq Stock Market trading.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Jenny Strasburg in New York at jstrasburg@bloomberg.net

Last Updated: September 22, 2006 17:05 EDT