"With some of the really huge hedge fund of funds, they had so much capital to put to work that it was a fait accompli that they would invest in Amaranth, because of its size," said Bruce H. Lipnick, chairman and chief executive officer of Asset Alliance Corp., New York. Asset Alliance manages about $500 million in hedge funds of funds and did not invest in Amaranth. "And when you use 50 or 60 managers in your portfolio, it was really hard to miss Amaranth," Mr. Lipnick said.
Other large funds making Amaranth-related changes include the board of the $46 billion Massachusetts Pension Reserves Investment Management, which tightened its investment guidelines rather than replace its hedge fund-of-funds managers, said Michael Travaglini, executive director.
"Did you invest in Amaranth?" is the very first question being asked in meetings with institutional investors and their consultants, said one hedge fund-of-funds executive who requested anonymity. The source's firm did not invest in Amaranth, but he noted that for funds of funds that did, "How believable their argument is about why they were in Amaranth at all depends to a great extent on how big their exposure was."
That's one of the first questions investment officials at the New Jersey Division of Investment asked when it started investigating what happened at Amaranth and what exposure the fund had through its funds of funds.
According to Mr. Clark's analysis, the New Jersey fund had $22 million invested in Amaranth through three funds of funds. Arden's allocation to Amaranth was 7.78% of the commingled hedge fund of funds in which the state invested. That's more than twice the exposure of New Jersey's two other hedge funds of funds that invested in Amaranth: 3.6% by Goldman Sachs and 3.3% by Rock Creek Management. Both firms manage separate accounts for the New Jersey fund that mimic the portfolios of their commingled funds, Mr. Clark said in his memorandum. Arden manages a $100 million mandate for the New Jersey fund; Goldman Sachs manages a $250 million portfolio; and Rock Creek manages $150 million.