Hedge Funds Gird for Withdrawals

Hedge funds, frequently at the mercy of antsy investors, are bracing for a wave of withdrawals at the end of the month.

HBK Investments LP, which peaked last year with more than $14 billion in assets, is finding its doorstep awfully crowded with clients asking for their money back. Already, investors have sought to withdraw more than 30% of their capital this year, according to people familiar with the figures. Firm-wide assets have shrunk to $11.5 billion. HBK declined to comment.

...

"Investors speak to each other. Many will feel that if they might want to pull money, it's best to get in line in case there's a rush to the exits," said Jeff Vale, principal of Infinity Capital Partners in Atlanta, which invests clients' money in hedge funds and isn't an HBK client. "June 30 is going to be interesting. The biggest risk out there is liquidity."

...

HBK wasn't the most obvious candidate for a stampede. But, these days, investors don't need a gut-wrenching loss to prompt them to pull their cash, and redemption requests have been piling up, reaching levels the firm hasn't seen in a decade.

Investors have been cautious about putting money with many established hedge funds this year, too. Some instead have committed to new credit funds set up to buy mortgages and other distressed assets. As those funds make capital calls, investors have to send in their cash -- another factor in the redemption trend, hedge-fund managers say.

Redemptions throughout the hedge-fund community could have ripple effects in the markets in coming weeks as managers raise cash by selling investments common to many portfolios. The selling could add to tumult in financial stocks, long a favorite of hedge funds. Those shares have been extremely volatile lately.