Amaranth Advisors LLC, a hedgefund manager with about $9.5 billion in assets, told investors its two main funds fell an estimated 50% this month because of a plunge in natural-gas prices.

“We are in discussions with our prime brokers and other counterparties and are working to protect our investors while meeting the obligations of our creditors,” the 43-year-old founder of the Greenwich, Connecticut-based firm, Nick Maounis, said in a letter to investors obtained by Bloomberg News. The funds, which had gained 26% through August, are down at least 35% for the year, or about $4.6 billion.

Amaranth, which made so-called spread trades that try to profit from price discrepancies among futures contracts, is at least the second hedge fund to be hurt by this year’s tumble in natural gas. Last month, MotherRock LP, a $400 million fund run by former New York Mercantile Exchange President Robert “Bo” Collins, went bust after natural-gas futures fell 68% from their December 13 peak.

“The speed with which leveraged funds can evaporate is mind boggling,” a professor of finance and economics at Boston University specializing in energy markets, Mark Williams, said.

Earlier this month, Amaranth, named for an imaginary flower that never fades, bought a portfolio of gas trades from ABN Amro Holding NV that the Dutch bank took over from MotherRock. ABN Amro had lent MotherRock $60 million, and is still owed money by the fund.

Amaranth is “near the end of our disposition of natural-gas exposure,” the letter said, adding the firm had met all margin calls, or demands from brokers for additional collateral to cover loans. Steve Bruce, an Amaranth spokesman, declined to comment.

Gas prices fell 12% last week as the U.S. Energy Department reported stockpiles climbed 12% above last year’s levels. Demand for the powerplant fuel usually declines after summer air conditioner use slows and before heating needs pick up.

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.

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 75 cents today on the New York Mercantile Exchange. Spreads between March and April contracts in 2008, 2009 and later have also collapsed. As of June 30, Morgan Stanley’s Institutional Fund of Hedge Funds had $126 million invested in Amaranth.

The trader behind Amaranth’s natural-gas bets is Calgary-based Brian Hunter, who is co-head of the firm’s global energy and commodities business. As of June 30, energy trades accounted for about half of its funds’ capital and generated about 75% of their profits. Before joining Amaranth, Mr. Hunter, 32, was responsible for Deutsche Bank AG’s natural-gas trading desk from 2001 until 2004. Before that he was an options trader for Transcanada Gas Services.