Prominent Hedge Funds Restrict Withdrawals ~ market folly

Monday, December 8, 2008

Prominent Hedge Funds Restrict Withdrawals

Recently (and unsurprisingly) numerous hedge funds have begun to restrict withdrawals as they fight off the barrage of investors who want their money back. In an environment where seemingly everyone needs cash, this can be a problem. But, those investors entered into those funds knowing full well that their money could be locked up at some point. And, that time has come.

Rounding up the info, we've seen that some fairly prominent and large hedge funds are battening down the hatches. Here's a quick summary.

  • We already wrote that Tudor Invesment Corp has frozen withdrawals from its $10 billion Global BVI Fund. This fund has some illiquid assets that they are trying to spin off into a separate fund and they need some time to get it approved and sorted. They had reported seeing redemption requests for 14% of the fund's capital.
  • D.E. Shaw & Co, the firm ran by David Shaw, has locked up redemptions from its Oculus fund and its Composite fund. Their Oculus fund saw redemption requests for 8% of their capital, while the Composite fund saw requests equal to 6%. The firm manages around $36 billion and you can view a video about the firm's work culture here. In Alpha's latest hedge fund rankings, D.E. Shaw is ranked 6th in the world.
  • $30 billion Farallon Capital Management is also suspending withdrawals from their largest fund after receiving redemption requests for around 25% of the fund's capital. The fund won't be charging typical management and performance fees, but instead will charge accounting fees. In Alpha's latest hedge fund rankings, Farallon was ranked #3. Farallon's portfolio performance is available here and you can read their latest letter here.
  • Fortress Investment Group froze withdrawals from an $8 billion fund of theirs, after they received requests for withdrawals for a staggering 40% of the fund's capital.

Also, we're currently in the middle of our hedge fund portfolio tracking series. We're covering the 3rd quarter 2008 13F filings of various prominent hedge funds (including those above) in order to breakdown the changes they've made to their portfolios. You can view the portfolios of the funds we've analyzed thus far here.

Source: Bloomberg

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