Thursday, February 19, 2009

Fortress, Tudor and Threadneedle Permit Redemptions Again

Hedge Fund Alert reports that, as expected, more large hedge funds are following Ken Griffin's example and are reversing the course on suspending redemptions. Some of the larger names that are starting to let investors get their much needed if significantly reduced cash are Fortress, Threadneedle and Tudor.

Fortress blocked redemptions from its flagship Drawbridge Global Macro Fund in December, telling investors at the time that they would get 72% of their requested withdrawals by April. But on Jan. 22, the New York firm moved up the timetable, promising investors they would get the 72% back this month, subject to a 10% hold-back pending a final audit. The remaining 28% of assets that the investors sought to redeem — representing illiquid investments — has been put into a side pocket to be paid out over 18 months.

Threadneedle told investors last week that it will now honor redemptions from its Threadneedle Emerging Debt Crescendo Fund. The announcement came three months after the London firm said it was suspending withdrawals. The fund, which invests in emerging-market debt, had $131.5 million of assets at yearend. It suffered a miserable October that contributed to a 19.4% loss for the year.

Tudor shocked the industry in November when it suspended redemptions from its flagship Tudor BVI Global Fund and divided the vehicle into two funds, one containing its liquid assets and the other its illiquid holdings. The vehicle had $9.8 billion under management at yearend, and was down about 4.5% for 2008.

Tudor also eliminated a clause that would have permitted the fund’s managers to set a 25% limit on redemptions from the liquid fund, for any reason. Now, Tudor won’t invoke a“gate provision” for any reason.
The ploy of suspending redemptions has likely come to an end as hedge funds, in typical short-sighted approach to everything, saw an up January and decided that investors will be placated by an up 2-3% and will cancel previous redemption requests. However, with the market continuing to flounder and hedge funds likely set to post a very bloody February, this could prove a costly mistake, as it is likely to accelerate the forced selling of more and more liquid and illiquid assets as natural bids disappear from the market. Sphere: Related Content
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