Another Hedge Fund freezes redemptions

Get your money out of the financial system while you still can...convert it to real value: gold & silver.

Citadel locks up investors’ funds

Posted by Stacy-Marie Ishmael on Dec 15 05:35.

Citadel Investment Group has joined the rush of hedge funds suspending redemptions to investors, a development that is in effect locking up hundreds of billions of dollars in cash during a volatile period in global markets. Ken Griffin, Citadel’s founder, sent a letter on Friday to investors in the group’s flagship Kensington and Wellington funds telling them that the group had decided to hold on to their money at least until March. Citadel has about $15bn under management after suffering big recent losses, and by imposing this lock-up joins a growing list of hedge fund groups - including Tudor, Farallon and DE Shaw - that have imposed restrictions on the ability of investors to withdraw money, the FT said.

This entry was posted by Stacy-Marie Ishmael on Monday, December 15th, 2008 at 5:35 and is filed under Capital markets, Hedge funds. Tagged with citadel.

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Bank Runs in the Philippines

Herein lies the problem with fractional reserve banking...they only keep a fraction on reserve to cover deposits. If more than 10% of depositors attempt the pull out their money, there will not be any left for them. It is for this reason the FDIC is a major confidence game. The FDIC has less than 1% on reserves against total deposits. My advice? Only keep in the banks what you can afford to lose....

Heavy withdrawals hit Gaisano bank as more banks close

CEBU CITY — Alarmed by the bank holidays declared by rural banks under the Legacy Group, depositors have flocked to a Gaisano-owned bank since Wednesday in a bid to withdraw their money.

Three of the seven branches of the Rural Bank of Subangdaku (RBS) in Metro Cebu and one in Dumaguete City in Negros Oriental suffered from heavy withdrawals since Wednesday, said spokesperson and administrative manager Maritess Obenza.

Despite this, she assured that they had no plan to declare a bank holiday in any of the affected branches.

"The board (of directors) is still meeting on how to address the withdrawals although we have contained these because we were able to explain to our depositors and convince them that there’s no need to panic," Ms. Obenza said.

RBS depositors panicked after rural banks under the Legacy Group declared bank holidays. The affected RBS branches are located near the Legacy banks.

The Bangko Sentral ng Pilipinas Cebu regional office has confirmed that the Pilipino Rural Bank, Inc. and Philippine Countryside Rural Bank, Inc. have declared bank holidays. The Bank of East Asia, formerly Rural Bank of Bisayas Minglanilla, also declared a bank holiday on Wednesday.

All three are under the Legacy Group and covered by a recent Supreme Court ruling that upheld the central bank’s move to close them for capital deficiency.

A fourth bank, the Rural Bank of Bais, also declared a bank holiday on Wednesday. In a notice posted on its doors, the bank said it was waiting for the release of its emergency loan by the central bank.

A source at the Bangko Sentral Cebu office, who asked not to be named, said they were still evaluating the situation at the Rural Bank of Bais and Bank of East Asia as of yesterday.

They have been informed of the heavy withdrawals at the Rural Bank of Subangdaku, but they were confident that the bank was capable of servicing these withdrawals. — Marites S. Villamor

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Story Location: http://www.bworldonline.com/BW121208/content.php?id=023
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Modern-day Bank Runs and Bank Holidays

Here is a modern-day version of the "bank holiday". The hedge fund freezes the funds the minute you want to take them out.

D.E. Shaw, Farallon Restrict Withdrawals as Fund Freeze Deepens

By Saijel Kishan and Katherine Burton

Dec. 4 (Bloomberg) -- D.E. Shaw & Co. LP, the investment firm run by David Shaw, and Farallon Capital Management LLC limited withdrawals by clients, joining more than 80 hedge-fund managers to impose restrictions in the past two months.

D.E. Shaw, which oversees $36 billion, capped redemptions from its Composite and Oculus funds, said two people familiar with the New York-based company. Farallon, a $30 billion firm based in San Francisco, did the same with its biggest fund after investors asked to get back more than 25 percent of their money.

The firms are two of the biggest to block withdrawals, known as putting up gates, so they aren’t forced to liquidate investments at distressed prices to raise cash. New York-based Fortress Investment Group LLC said yesterday it froze an $8 billion fund after getting redemption requests for 40 percent of its assets. Tudor Investment Corp., the Greenwich, Connecticut, firm run by Paul Tudor Jones, locked the $10 billion BVI Global fund last week ahead of plans to split the fund into two.

“There’s no longer the stigma associated with putting up gates or suspending redemptions as it was before this crisis,” said Jaeson Dubrovay, head of the $19 billion hedge-fund group at consulting firm NEPC LLC in Cambridge, Massachusetts. “It’s actually being encouraged by some large institutions as a way to protect longer-term investors from those who panic and redeem.”

Darcy Bradbury, a spokeswoman for D.E. Shaw, and Steve Bruce, a Farallon spokesman, declined to comment.

Industry assets peaked at $1.9 trillion in June, data compiled by Chicago-based Hedge Fund Research Inc. show. Investment losses and withdrawals may shrink that amount by 45 percent by the end of this month, according to estimates by analysts at Morgan Stanley.

Outperforming Peers

The gate on D.E. Shaw’s Oculus fund was triggered after the company received redemption requests for more than 8 percent of assets, said the people, who asked not to be identified because the information is private. The fund, which tries to profit from global economic trends, is up about 10 percent this year, compared with the average 16.4 percent decline for the industry through October, Hedge Fund Research reported.

Investors asked to redeem more than 6 percent of D.E. Shaw’s Composite fund, which pursues multiple investment strategies and has lost 4 percent.

Even hedge funds that are outperforming peers have been hit by redemptions because they are a more ready source for cash for investors. Shaw, 57, started his firm in 1988 and has 1,600 employees worldwide.

First Losing Year

Farallon, founded by Thomas Steyer, told investors in a letter that Farallon Capital Institutional Partners LP plans to resume redemptions as early as January. Meanwhile, they won’t be charged management or incentive fees. They will pay expenses such as legal and accounting fees, according to the letter, which was posted yesterday on the Web site dealbreaker.com.

The Farallon fund fell 23.8 percent through October, and is headed for the first annual loss in its 22-year history. Steyer, 51, invests in assets from stocks to distressed debt and real estate. His main fund climbed at an average annual rate of 14.6 percent for the past 22 years, compared with about 9 percent for the Standard & Poor’s 500 Index.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net
Last Updated: December 3, 2008 22:14 EST

But wait! There's more!

From The Times
December 4, 2008
Fortress suspends redemptions as investors seek to pull $3.5 billion
Miles Costello

Fortress, the New York-listed hedge fund, became the latest victim of the market crunch last night as it suspended redemptions on four of its flagship Drawbridge funds after investors moved to pull $3.5 billion (£2.4 billion) – almost half the funds’ assets.

Shares in Fortress, one of the few listed hedge funds, lost more than 25 per cent as it said that redemptions meant the assets managed by the four funds would fall to $3.65 billion by January.

Wes Edens, Fortress’s co-founder and chief executive, has already told shareholders that investors were preparing to redeem capital as they seek safer-haven assets to escape the hedge fund rout. Despite this, yesterday’s alert sent shares as low as $1.71 in early trading before they closed at $1.87.

At the end of September, Fortress was one of the world’s biggest hedge fund managers, with assets under management of $34.3 billion. Its latest decision underscores how wide-reaching the hit on the industry has become. Fortress said that its move was temporary but gave no date for unfreezing the funds.

Fortress has “evaluated the most appropriate course of action to take in response to the requested redemptions . . . and [has] acted unanimously to temporarily suspend pending redemptions from the fund”, the group said in a filing to the Securities and Exchange Commission, the American regulator.

Fortress offers its investors monthly opportunities to withdraw their assets. It said that the $3.5 billion related to November and this month, adding that it had already briefed investors about $1.5 billion of the $3.5 billion.

Hedge funds are suffering their worst performance for ten years and worldwide the industry is on course for an annual loss, only its second ever. Sliding bond and equity markets and panic-stricken reactions by investors have combined to reduce hedge funds’ total assets under management to about $1.5 trillion, compared with $2 trillion at its peak, according to estimates from Hedge Fund Research, the Chicago research firm.

Funds have been rushing to shut the door on investors, as well as restructuring their investment vehicles and cutting management and performance fees in order to bolster their businesses.

Paul Tudor Jones, one of the best-known hedge fund managers, last week suspended redemptions on his Tudor Investments’ $10 billion BVI Global fund while he and his team moved to restructure the underperforming parts of the fund. Tudor had faced $1.4 billion in redemption calls in recent weeks, Mr Jones wrote in a letter to investors.

Fortress said that the redemption freeze applied to four Drawbridge Global Macro funds, which place big directional bets on macroeconomic events such as interest rates and long-term currency convergences.

Suspending redemptions was once a sign that a fund was about to fail, but it is now a much more accepted tool to safeguard capital, for a while at least. The hedge fund industry shrank by 9 per cent in October when investors withdrew a record $40 billion.

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FDIC Friday - two more banks fail

Two banks fold, bringing total to 15 failures this year
By John Letzing, MarketWatch
Last update: 6:50 p.m. EDT Oct. 10, 2008


SAN FRANCISCO (MarketWatch) -- Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank became the latest victims of the ongoing financial crisis on Friday, when they folded and their deposits were transferred by the Federal Deposit Insurance Corp.

The closures are the 14th and 15th bank failures so far this year.

The FDIC said in a prepared statement that Main Street Bank had $98 million in total assets and $86 million in total deposits as of Tuesday. All of Main Street's deposits were assumed by Monroe, Mich.-based Monroe Bank & Trust, the FDIC said.

The FDIC said that Meridian Bank had total assets of $39.2 million and $36.9 million in total deposits as of Sep. 25. National Bank will buy roughly $7.6 million of Meridian's assets, while the FDIC will "retain the remaining assets for later disposition," according to its statement. All of Meridian Bank's depositors, "including any with deposits in excess of the FDIC's insurance limits," will automatically become depositors of Hillsboro, Ill.-based National Bank, the FDIC said.

The FDIC said Main Street Bank's failure will cost its insurance fund between $33 million and $39 million, while Meridian's failure will cost the fund between $13 million and $14.5 million.
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Are you ready for a Bank Holiday?

Have you prepared yourself in the event a Bank Holiday is declared? Read last night's comments from Jim Sinclair:

Dear Friends,

Gold is about to VAULT UP.

I am reliably informed that the paper versus bullion gold war is lost by paper gold at a $930 close.

Gold will vault to slightly under $900 then get pushed back, but not much at all. Directly after that we are off to $1200.

A Bank Holiday is moving from possible to PROBABLE.

* Have you fully protected yourself?
* Have you distanced yourself as much as possible away from financial agents holding your assets?
* Have you gotten paper certificates for your shares or became a direct registration book entry at the transfer agent?
* Have you protected your retirement accounts the same way as your shares above but in the name of the retirement account and the trust holding them?
* Have you closed your Money Market fund accounts regardless of what assurances your bankers offer?
* Have you withdrawn from your Credit Union?
* Have you exited your corporate retirement fund?
* Do you have significant gold and related shares investments?

It is getting UGLY out there as each day an attempt to postpone a bank holiday fails. Almost every other day lately financial leaders of the world have announced new plans that were "the final answer" to the super-glued credit market. All these plans have had no effect. The Dow fell like a rock off a cliff.

This says all efforts have failed.

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