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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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

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More Bank Runs

People are jumping from bank to bank but what they don't realize is that the new bank is probably just as bad off as the old bank.

Latvia mulling IMF loan as crisis sweeps Nordic region

Latvia has been forced to bail out its second largest bank over the weekend and may soon need a rescue by the International Monetary Fund as the financial crisis engulfs the Baltic region, and much of Scandinanvia.

By Ambrose Evans-Pritchard
Last Updated: 8:17AM GMT 10 Nov 2008
Telegraph

Premier Ivars Godmanis stunned the country by announcing that Parex banka had been half-nationalised in an attempt to head off a serious crisis in the face of escalating capital flight from the country.

"We have to do everything to avoid trouble, not only for specific banks, but for the banking system as a whole," he said.

Mr Godmanis said Latvia was examining a raft of measures to rescue the economy, including possible aid from the IMF and European Union. Iceland, Hungary, and Ukraine have already obtained loans for the IMF.

Latvia is facing a brutal recession after years of torrid credit growth and one of the most extreme property bubbles in Eastern Europe. The economy contracted by 4.2pc in the third quarter.

House prices have fallen 21pc over the last year, according to Global Property Guide. The swing from boom to bust has been made worse by heavy use of mortgages in euros, Swiss francs, and yen.

The rating agencies have rushed through a spate of downgrades in recent days for the Baltic trio of Latvia, Estonia, and Lithuania, warning that heavily reliance on short-term foreign funding has left them dangerously exposed to the global squeeze.

"If the situation were to worsen, Latvia could be forced to seek balance-of-payments support from the EU or the International Monetary Fund," said Kenneth Orchard, senior analyst at Moody's

"The global liquidity crisis will probably cause a shock to the Latvian banking system, which will reverberate throughout the rest of the economy. Unless there are major improvements in the European syndicated loan market by early 2009, the government will be forced to take remedial action."

Oskars Firmanus, head of the Latvian consultancy Paus Konsults, said the Parex rescue had badly shaken depositors in Riga. "It has come as a big surprise. The bank has been very secretive and did not tell anybody there was a problem. People have been lining on the streets over the weekends trying to get their money out of ATM machines," he said.

Swedish banks have large exposure to the Baltic market, adding to their woes as the industrial downturn hits Scandinavia.

The IMF warned in a recent report that the Baltic operations of Stockholm's banks "could cause a credit crunch in Sweden itself" if the closure of the wholesale capital markets continues for much longer. Total lending to Eastern Europe by Swedish banks is equal to 25pc of the country's GDP.

Swedbank dominates lending in Latvia and Estonia, while SEB is the biggest lender to Lithuania. The share price of the two banks have fallen by 70pc from their peak.

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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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FDIC Insurance: The Big Lie

The new bailout package has lifted the FDIC insurance amount from $100,000 per account to $250,000 per account. Do not be misled by this Confidence Game.

Let's look at the facts:

The FDIC, according the its 2007 annual report, has $53 billion dollars.
The Indy Mac Bank Failure is expected to soak up from $4 billion to $8 billion.
That leaves any where from $45 billion to $49 billion dollars to guarantee over 4 Trillion dollars worth of deposits.

Banks only keep about $1 on hand to cover every $10 worth of deposits. The rest of the money has been loaned out. This means that if more than 10 percent of the depositors attempt to withdraw their funds at any one time the banks would have to shut down because the funds would not be there. How do you like those odds of getting your money out? It's like playing a game of musical chairs with one chair and nine other people. Everything is fine while the music is playing but what happens when the music stops?

Here is what would likely happen if more than 10% of the depositors attempt to withdraw their cash at the same time:

First, the government would declare a "bank holiday" and close down the banks for a period of days. When they reopen they would likely limit the amount of money that you can pull out each week. A few short years ago this happened in Argentina where depositors could only withdraw $200 per week.

Next, they would pump liquidity into the markets (in other words they would print massive amounts of money) sparking accelerated inflation. This would cause people to dump their dollars and trade them for basic goods and gold in order to protect their purchasing power.

This rapid increase in the money supply becomes self-feeding as people dump more and more dollars for items that act as a "store of value" causing supply shortages. Prices of food and other necessities would rise rapidly. Precious Metals will also rise rapidly.

Don't wait for these things to happen before acting. Pull out the money you want to protect, build up your food storage, and buy as much gold, silver, and platinum that you can.

Sincerely,
The Bullion Insider
Trust in Gold