GS to Withdraw $120 Million from Major Hedge Fund

Goldman Sachs is withdrawing more than $120 million from Harbinger Capital Partners' most prominent hedge fund, the $3.4 billion Harbinger Capital Partners Fund. Harbinger has approximately $20 billion in assets under management. Goldman's withdrawal comes after revelations that Harbinger's CEO, Philip Falcone, borrowed hundreds of millions from the firm's other funds to pay personal taxes as well as the relatively poor performance of the fund.


Because redemption agreements with Harbinger limit quarterly redemptions to 25% it will take 12 months for Goldman to receive its entire investment. It is reported that Goldman had as much as $1 billion invested with Harbinger.

Philip Falcone, who grew up in Minnesota and was a star hockey player in college, helped Harbinger funds return more than 100% in 2007 with timely bets that the U.S. housing market would collapse.

Even Successful Hedge Funds Face Withdrawals

Even the most successful hedge funds can face withdrawals. This was illustrated in June as giant hedge fund Paulson & Co. lost more than $2 billion in assets under management. Although, about the thirds of that amount can be accounted for by market losses, Paulson & Co. likely paid out about $600 million in investor withdrawal requests. In June, Paulson & Co.'s financial services Recovery Fund, lost more than 12%. Paulson's best performing fund was its gold fund, up more than 7% in June.

On the other hand, hedge funds actually did quite well in May in terms of investor flows, taking in more than $4 billion in new assets, even while the industry lost $30 billion in trading the same month.

Source: Market Watch

New Way to Prevent Hedge Fund Redemptions

Over the years hedge funds have come up with various redemption policies. Most allow quarterly redemptions of some sort, but some funds, especially those taking positions in hard to price illiquid securities, prevent redemptions for two years or more. One of those funds, Polygon Investment Partners in London, has a novel way to satisfy investors that are demanding liquidity - allow them to redeem their investments at a 25% discount to NAV. The hedge fund in question, Polygon's $3.7 billion Global Opportunities fund, lost 48% in 2008 and would otherwise not allow redemptions until 2012.

With regard to Polygon's offer of redemptions at a 25% discount, Founder Paddy Dear said “We are pleased to have been able to offer this opportunity to those of our investors that had an immediate need for some liquidity."

Polygon Investment Partners has $5.3 billion in Assets Under Management (AUM).

Hedge Funds Hit Hard by Redemptions in December

Hedge Funds Faced Tough Month as Redemptions Top $4 Billion in December

Though partially due to seasonal factors, hedge funds saw net outflows of more than $4 billion in December, ending what was a somewhat positive quarter for hedge funds overall.

According to Peter H Laurelli of HedgeFund.net“Although it is an outflow, it is still the lowest change in assets due to investor flow for the year.”

According to the article, investors pulled over $330 B from hedge funds in all of 2009, or 15% of total hedge fund assets. Much of this was early in the year as the US faced an unprecedented financial crisis:

Source: NYTimes Dealbook

Hedge Fund Atticus Capital to Close Flagship Fund

Atticus Capital announced today it will return $3 billion to investors from two funds, including its flagship hedge fund, the Atticus Global Fund. The fund has not performed well over the last couple years. The Atticus Global Fund was down 25% in 2008 and 9% in 2009 YTD.

As recently as 2007, Atticus Capital had $3.7 billion in assets under management (AUM).

According to Atticus founder, Timothy Barakett, the move was for personal reasons and not in response to investor redemptions.

The $1.2 billion dollar Atticus European Fund will remain open.

Atticus Capital typically employs a merger arbitrage and risk arbitrage, as well as event driven strategies and was founded in 1995 by Timothy Barakett at the age of 29. Atticus is based in New York with an additional office in London.
Contact info for Atticus Capital:
Atticus Capital
767 5th Avenue
New York, NY 10153
Phone: 212-256-8000

DE Shaw Group to Lighten Redemption Restrictions

D.E. Shaw & Co., the $29 billion investment firm founded by David Shaw, will permit investors to withdraw more money from its two biggest funds than previously permitted, according to Bloomberg.

DE Shaw recently limited quarterly redemptions in November to 8.3 percent of investor assets after a surge in withdrawal requests. The NYC-based firm is now offering clients the one-time option to pull 16 percent of their assets from two of its funds, its Oculus and Composite funds, next month. Those who accept won’t be able to make additional withdrawals this year.

Hedge Fund, Satellite Asset Management, to Close

New York based hedge fund Satellite Asset Management is closing its doors six months after suspending redemptions.

The firm, with $2.8 billion in AUM, has begun returning money to investors in its three funds, Bloomberg News reported. The three funds being liquidated are the Satellite Overseas Fund, Satellite Fund II and its largest fund, the Satellite Credit Opportunities fund. In late 2008, Satellite reported its $2billion Credit Opportunities Fund was down as much as 35% and was facinf large redemption requests.

The firm, founded by a trio of Soros Fund Management veterans a decade ago (Lief Rosenblatt, Gabe Nechamkin, and Mark Sonnino) managed as much as $7 billion as recently as the end of 2007. It lost some 35% last year, and was forced to halt withdrawals in November.

Hedge Fund Redemptions Slow in March

Hedge fund assets under management fell in March by 1% despite an average 2% performance during the same period, according to HedgeFund.net. Roughly speaking, actual redemptions in March amounted to 3% of hedge fund assets. This is seemingly large monthly decline, but it is minor in comparison to the declines in hedge fund assets earlier in the year and in 2008. Hedge fund asset declines for March were about $18 billion compared with declines in December of more than $180 billion.

Hedge Fund Alson Capital Closes Amid Redemptions

Amid massive redemptions, hedge fund Alson Capital is closing its doors. The $800 million fund performed poorly in a difficult market. The fund once manages as much as $3.5 billion. Alson Capital was founded 11 years ago by Neil Barsky, a former Wall Street Journal employee who went on to work with Morgan Stanely before creating his fund.

According to Barsky: “I likely will never again manage a hedge fund,” he wrote to investors. He did pronounce himself “young enough and energetic enough to purse new initiatives either in the fields of business, government or philanthropy.”

Preferential Hedge Fund Redemptions

Are hedge funds giving certain clients preferential treatment with regard to redemptions?

SEC Commissioner Elisse Walter believes some funds have done so. “Principals, employees or favored investors of the hedge-fund adviser may have received ‘preferential redemptions’ from the fund at issue.” Walter said in testimony to the House Financial Services Committee today.

More than 1/6 of hedge funds are halting redemptions, limiting withdrawals from certain funds, or altering their redemption schedule.

The SEC is also zeroing in on trading irregularities and lack of due dilligence by feeder funds, such as those that gave money to Bernard Madoff. The SEC claims to be developing new "technological tools" to deal with trading issues such as insider trading and front running.

2008 Hedge Fund Redemptions - A New Record

Hedge fund redemptions for 2008 reached an all-time high as investors pulled money from performing and non-performing funds alike. In 2008 almost 1500 hedge funds shut down, almost double the previous record of 848. Additionally, half of the hedge fund closures in 2008 came in the fourth quarter with 778 hedge funds closing in Q4 2008 alone.

* We have listed several hedge fund closings before, but here is a short list:

Drake Management
Peloton Partners
Ascot Partners
Ospraie Management ($2B+)
Okumus Capital
Gordian Knot ($27B Sigma Finance Fund)

And what list of hedge fund closures would be complete without Bernard Madoff Investment Securities.
and many more can be found at hedge fund implode

* All in all, almost 15% of the hedge fund industry closed shop in 08.

* Hedge fund openings also fell. The 650+ hedge funds that opened in 2008 was the lowest since 2000.
* The number of new fund starts in Q4 2008 (56) was half of that the previous quarter (117)

Read More Here:

Hedge Fund Pershing Square Capital Management Allowing Redemptions

William Ackman, 42, fund manager of hedge fund Pershing Square Capital Management, is cutting fees and allowing investors to withdraw what is left of their investments. This move could encourage other hedge funds to eliminate some of their restrictions on withdrawals and redemptions.

Of course, not all funds have had as poor performance as Pershing Square's Pershing Square IV Fund, which is down 90% on the year and is left with only $25 million in assets.

Pershing Square Capital Management, based in New york, is waiving performance fees until the fund reaches its high water mark, though given the losses that could be decades.

Record Hedge Fund Redemptions in Q4

Hedge Fund Redemptions Reach Record in Q4 2008:
Hedge fund investors withdrew more than $150 billion from hedge funds in the fourth quarter of 2008, a new record. Several funds including Tudor Investment Group, Citadel Investment Group, Drake Capital, and other large funds were forced to either suspend redemptions or create new lock-on requirements to halt the flow of assets.

Hedge funds lost more than 18% of their value in 2008 and saw total hedge fund assets under management (AUM) drop 30% from $2.0 trillion to $1.4 trillion in 2008.

Read the full article:

Citadel's Key Hedge Funds Down More than 50% in 2008

Citadel's Main Hedge Funds Lost 53% in 2008

Citadel Investment Group, the Chicago-based hedge fund founded by Ken Griffin, is reportedly facing losses of more than 50% in its Kensington and Wellington funds which lost almost 10% in December alone.

The funds assets had previously totaled more than $10 billion. The report comes after Citadel halted redemptions from its Kensington and Wellington funds until at least March.

JD Capital Management Liquidates $1B Hedge Fund

JD Capital Management is said to be liquidating the Tempo Master Fund, a fund that is reported to be down more than 40% on the year.

The hedge fund is run by J. David Rogers, a former Goldman Sachs executive.

Read the full article here

List of Hedge Funds Halting Redemptions

Hedge Fund Redemptions Halted
Dozens if not hundreds of hedge funds have limited investors' redemptions in the last several months. Below is a partial list of hedge fund that have limited investor redemptions/withdrawals:


Absolute Capital Management - The fund that once managed more than $3.2 billion notified investors in October, 2008 that it would halt withdrawals and close two of its funds.

Basso Capital Management - Connecticut based Basso Capital Management halted withdrawals from several of its funds for the third quarter, 2008.

Blue Mountain Capital Management - On Nov. 4, 2008 Blue Mountain Capital Management, facing withdrawalas from investors and fund of funds, halted withdrawals. Investors were given 2 choices: 2) Pull their money at a "cost" or 2)Lock up their investment for a period of time with "fees consistent with longer lock-up periods."

Deephaven Capital Management - Knight Capital Group's Deephaven Capital Management halted withdrawals from two of its funds in early November, 2008 for the third quarter.

Diamondback Capital Management - Diamond Capital told investors some of their money would be unavailable for redemption because assets were tied up in Lehman Brothers.

Drake Capital Management - New York based Drake Management halted withdrawals from certain funds in October, 2008.

Ellington Capital Management - Ellington Capital Management, a CT based hedge fund founded in 1994 restricted withdrawals in the middle of 2008.

Fortress Investment Group - Mega hedge fund Fortress Investment Group had $4.5 billion in redemptions in the first three quarters of 2008, totaling more than 10% of the firms assets under management.

GLG Partners - European hedge fund, GLG Partners said it would limit withdrawals from its $3 billion long-short European fund. The hedge fund manages $19 billion overall and previousliy halted redemptions in its emerging markets fund.

Highbridge Capital Management - Highbridge Capital Mamnagement, a hedge fund run by JP Morgan, said in November, 2008 that it would stop redemptions in its Asian Opportunities Fund, which at the time was down 32% on the year.

Pardus Capital Management - The $2 billion fund first notified investors it would halt redemptions in March of 2008. As of that time, the fund was down 40% from its high-water mark.

Platinum Grove Asset Management - Former nobel prize winner, Myron Schole's hedge fund Platinum Grove Asset Management stopped redemptions from its largest fund after losing more than 20% in October 2008 alone.

Tudor Investment Group - In November 2008, Tudor Investment Group announced it would halt redemptions from its DVI Global Fund. Tudor said it would split the fund in two, to create one fund for liquid assets and another for illiquid assets.

Again this is just a partial list of hedge funds that have halted redemptions in 2008. We will keep you updated in the likely event that more funds prevent investors from getting to their money.

Hedge Fund, Tudor Investment Halts Withdrawals

Tudor Investment Group is halting withdrawals from its BVI Global fund. Tudor is splitting the hedge fund into two separate funds and told investors they cannot withdraw funds until the restructuring is complete. Tudor's BVI fund is down 5% and investors have asked for redemptions equal to about 14% of the fund's assets.

Tudor Iinvestment Group's founder, Paul Tudor Jones, said he plans to move illiquid assets into a separate fund called Legacy, while leaving higher quality assets in the BVI fund.


Read the full story:

Global Hedge Fund Assets Decline by $170B in Q3, 2008

Global hedge fund assets fell by $170 billion in the third quarter of 2008. There have also been reports that large hedge fund redemptions worldwide accelerated in October and November. The $170 billion decrease in hedge fund assets in the third quarter represents an almost 10% decrease worldwide and comes amid plummeting asset prices on everything from commodities to stocks and most forms of debt.

Interestingly, the hedge fund strategies with the highest redemptions were long/short equity and fixed income arbitrage. Other hard hit strategies in terms of asset outflows were emerging markets and multi-strategy funds.


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Asian Hedge Fund, Highbridge Capital Management, Limits Redemptions

Highbridge Capital Management, a hedge fund owned by JPMorgan, may limit withdrawals from its Asian Opportunities Fund. The fund is down 32% on the year and Highbridge Capital Management intends to give investors half of their money returned by the end of January. The rest of investors' money will be returned in 12 to 18 months, reports Bloomberg. This comes after earlier news that Highbridge might limit withrdrawals from its Asia Opportunities Fund completely.

Though Highbridge's Asia-focused fund has performed poorly this year, it has returned more than 20% since inception, and double digit gains in 2006 and 2007.

JP Morgan purchased an interest in Highbridge Capital Management in 2004 and increased its interest to 78% in January.


Read the full story here:

Record $40 Billion in Redemptions from UK Hedge Funds

Financial Times reports that UK hedge funds saw upwards of $40 billion in redemptions last month. This is the highest monthly level of hedge fund redemptions in the UK since figures were first compiled in 1990. Even worse for funds and their investors, hedge funds lost more than $100 billion in AUM from lost market value.

One manager of a large hedge fund said: "Any hedge fund that says they didn't get hit by massive redemptions at the end of September is lying."

Read the full article