Amaranth Advisors, the troubled Greenwich, Conn.-based hedge fund, has avoided total liquidation, and might even regroup after a monumental one-month drop of $6 billion, according to Reuters.

In a letter to investors Wednesday, the company said it dodged  "forced liquidation" by settling with account lenders.

Amaranth, the letter said, "is focused on communicating with our investors and defining the future of our business."

But communication stalled Friday when the firm postponed a scheduled conference call for the fourth time since the news first broke Monday.

Also since Monday, the fund has rapidly begun selling its assets, negotiating with investors such as Citadel Investment Group and JP Morgan Chase.

Analysts suggest the company might also rely on the "gates" included in the contracts it has with investors that limit the amount that can be redeemed each quarter.

"It is within their right that they could have money for years because of the gate," one unnamed portfolio manager told Reuters.

Problems started with a bad bet on natural gas markets that resulted in the $9 billion fund's assets getting slashed by 65% in September and 55% since January.

According to documents describing Amaranth contracts, investors who choose to redeem their stakes might find their money is tied up, since the firm can only liquidate 7.5% of the capital each quarter.

Those investors who have applied for annual redemptions might not be able to redeem their shares until late 2007.

To be sure, Amaranth faces challenges bigger than client retention, including a brain drain, regulatory backlash and, of course, lawsuits.

"It's hard to imagine they don't get sued," said Marc Weingarten, an attorney at Schulte Roth & Zabel, who lists Amaranth among the clients he's had. "Some pension funds and other institutions just as fiduciaries will have to take some action," he said.

"The chivalrous thing to do is to return the money, go back to the black box and tinker with the algorithms," said Jay Gould, an attorney with Pillsbury Winthrop Shaw Pittman in New York." The idea that they would just stand by their documents and make investors wait years is not an informed business strategy," he said.

Industry experts note that other companies have hit hard times and regrouped only to rebound as successful industry leaders, most notably the D.E. Shaw Group, after a 1998 misstep.

But it is critical to win back the confidence of investors by proving there was no fraud, and that all weaknesses have been identified and addressed, Gould said.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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