Amaranth Advisors, the Connecticut hedge fund that lost billions in misplaced energy future investments last year, filed a motion June 7 to dismiss a lawsuit filed by the San Diego County Employees Retirement Association over significant losses sustained by the workers’ pension fund.
The motion filed in U.S. District Court in New York states managers of the $8 billion pension fund were well aware of the speculative and leveraged investment strategies used by Amaranth, and that these were clearly detailed in offering documents signed by county officials.
“Simply put, SDCERA took a known risk and lost money. It now seeks to recover, both its initial investment, and unrealized profits earned through the speculative trading that this lawsuit decries,” the court filing states.
SDCERA invested $175 million as part of a higher-risk strategy to improve its returns starting in 2005. After Amaranth sustained more than $6 billion in losses, its managers decided to liquidate the hedge fund’s remaining assets of about $3 billion.
According to the filing, the county pension fund passed up several dates it could have withdrawn its investment if it determined it was too volatile and risky. After eight months, the county’s investment grew to more than $244 million or 40 percent, and even when the hedge fund reported losses of 10 percent in May 2006, the county continued to maintain its investment. Only after the fund took substantial losses in September did the county request withdrawal, but by then, all withdrawals were temporarily suspended, the filing says.
So far, the county fund has recouped about $61 million from Amaranth, which is still liquidating its assets. The county lawsuit seeks $150 million in lost assets and damages.
, Mike Allen