The energy portfolio of Amaranth Advisors, the hedge fund that has lost about $6 billion on natural gas markets since the beginning of September, has been acquired by Wall Street bank J.P. Morgan Chase and hedge fund Citadel Investment Group, according to reports.

Banking giant Citigroup is also said to be involved in talks with the troubled group.

Amaranth said in letters to investors last night it had "concluded a negotiated transaction which transfers the entirety of our energy portfolio to a third party". Transferring the investments would prevent further losses and decreased its loans but the deal was done "at a price that resulted in additional significant losses," it added.

In the letters, which have been seen by news agencies, Amaranth founder Nicholas Maounis said the steps were taken to "avoid termination of our credit facilities and the risk of a consequent forced liquidation by our creditors".

The buyers were not identified by Amaranth but Reuters and the Wall Street Journal said they were JP Morgan and Citadel. Separately, Citigroup, the biggest US bank, was in talks yesterday about buying a stake in Amaranth, Bloomberg reported.

Amaranth now estimates its holdings dropped 65 per cent in September alone and that year-to-date losses were 55 per cent taking the value of its assets to just over $3 billion from $9 billion on September 1.

On Monday the hedge fund had told investors that year-to-date losses might be more than 35 per cent after natural gas markets went against the firm’s bets on the market.

One hedge fund lawyer told Reuters investors could sue Amaranth over the losses. Laurel Fitzpatrick of law firm Ropes & Gray told the news agency: "You would have to argue that this was gross negligence on the part of management or somehow a violation of the partnership agreement or offering document."

The mistake at the heart of the implosion at Amaranth Advisors appears to have been a huge bet that a long established trend in natural gas prices would continue. It is understood that Brian Hunter, head of energy trading, and his 20-strong team of traders at the Connecticut firm were badly wrong-footed last week when that trend went into reverse, The Times reported earlier this week.

The traders had speculated that the difference between futures prices for natural gas in the summer and winter would continue to widen, as it had done since the start of 2004. Instead, the gap narrowed dramatically, leaving the hedge fund manager nursing dramatic losses, thought to amount to several billion dollars, and scrambling to meet margin calls.

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