Another hedge fund freezes redemptions

Do you trust your money in the hands of others? This is another type of bank run. Consider liquidating and buying gold & silver:

Tudor Jones suspends withdrawals from flagship fund

By James Mackintosh
Financial Times

Published: December 1 2008 11:40 | Last updated: December 1 2008 11:40

Paul Tudor Jones, who shot to fame and made a fortune when he predicted the 1987 stock market crash, has suspended withdrawals from his $10bn flagship hedge fund and plans to split out toxic assets into a new fund with lower fees.

Greenwich, Connecticut-based Mr Jones, in a letter sent to clients on Friday, said investors wanted back 14 per cent of their money at the end of the year. This would have left the remaining investors holding too large a proportion of illiquid assets, particularly corporate credit in emerging markets, the letter said.

The suspension is further evidence that even successful hedge funds are being hurt by the rush for cash among investors, as the Tudor BVI fund is down only 5 per cent to the end of November, far ahead of the industry.

Some in the industry fear the suspension could lead to further withdrawals from successful funds as investors search for cash elsewhere, prompting more trouble for hedge funds.

“I recognise that a restructuring is an unwelcome, but I believe necessary, step against the backdrop of Tudor BVI’s 22-year history of unbroken profitable years,” Mr Tudor Jones wrote. “I believe it is but a brief step, however, on the road to important long-term changes for the benefit of all investors.”

Tudor is already in the process of splitting out the Raptor fund, run by James Pallotta from Boston, which has been hit by heavy withdrawals. Raptor was down 16 per cent to the end of October, according to one investor.

Illiquid assets will be split from the BVI fund into a new Legacy fund, holding corporate credits in Eastern Europe, Asia and Latin America, private equity and hedge fund investments. About $3.1bn of the fund’s assets are currently in emerging market credit – 62 per cent of it in upper-tier banks – but assets are short-dated and rolling off quickly, the letter said.

Mr Tudor Jones said withdrawals were likely to be allowed again at the end of March next year, after toxic assets have been split from the main, liquid, fund. The main fund will return to Mr Tudor Jones’ trading roots in highly liquid global macro positions, a strategy he dubbed “back to the future”.

Freewheeling macro traders, who bet on interest rates, leading stock market indices, commodities and currencies, have mostly avoided this year’s market disaster. Systematic, or computer-driven, macro traders are doing particularly well, with the Keynes fund run by Sushil Wadhwani, a former member of the Bank of England’s monetary policy committee and an ex-Tudor manager, up 34.4 per cent to the end of October.

Copyright The Financial Times Limited 2008

-------------------------
Buy Gold & Silver