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KAI RYSSDAL: Natural gas prices fell to a two-year low today. I mention that because gas has been causing a pretty big stir in the already volatile world of hedge funds this week. Amaranth Advisors placed a multibillion dollar bet on natural gas and lost. But it's asking investors to keep the faith, even as the fund begins to sell itself off. In a letter to investors last night, Amaranth admitted it's lost more than 65 percent of its value. Marketplace's Amy Scott begins our coverage in New York.

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AMY SCOTT: This is a classic case of a good gamble gone bad. Amaranth had made a lot of money betting on natural gas prices. Roger Ehrenberg heads the financial intelligence service Monitor110. He says the profits were too good to let go.

ROGER EHRENBERG: They had been up over 20 percent through August, and the returns of that magnitude were so far away from the rest of their peers, it was enticing to try and keep it going.

Amaranth is attempting to stay afloat. Citigroup is talking about buying a stake in the company. And Amaranth is selling its energy portfolio to investors led by J.P. Morgan and hedge fund Citadel Investment Group. They could make money if cold winter weather drives prices back up.

Meanwhile, Amaranth is trying to win back investors by sending letters and holding conference calls. Peter Fusaro, who tracks energy hedge funds, says good luck.

PETER FUSARO: Would you put your money in a bank that lost half your money? No, they're out of business.

If Amaranth does fold, analysts don't expect major fallout. The hedge fund actually lost more money than another fund called Long Term Capital Management did eight years ago. That famous blow-up nearly provoked a global currency crisis. But portfolio manager Mark Freed says Amaranth wasn't as highly leveraged.

MARK FREED: The losers are the investors in the fund, and that's really the way it's supposed to work.

The big losers include funds managed by banks like Goldman Sachs, Morgan Stanley, and Deustche Bank. Freed says they should have done their homework.

In New York, I'm Amy Scott for Marketplace.