June 2nd 2009:
"In order to ensure that all XYZ investors are treated equally, redemption requests have been suspended. Investors who have submitted second quarter redemption requests will instead participate in the overall return of capital. We anticipate that, in early July, investors will receive: (i) a cash payment representing approximately 75% of your current XYZ investment and (ii) an in kind distribution of a pro rata interest in the XYZ Private Portfolio(“XPP”) representing approximately 15% of your current XYZ investment."
Another sad day but is it really new to hedge fund investors? Just take a look back at the following note received almost 10 years ago from a different manager of similar size:
November 22, 2000
“Currently the fund’s portfolio is comprised of approximately 25% of private equities that are not liquid…. Any partner who has elected to redeem…. will receive their pro-rata share of each of the private securities in kind."
Once again, the industry has found a way to still fall into liquidity traps. The above funds were both straight forward "Long/Short Equity" managers with a mandate to invest in liquid stocks.
This is just an additional sign of the ongoing consolidation and/or liquidation that is expected within the hedge fund industry. It is worthwhile to consider that when managers suspend redemptions or invoke a gate, the interests of their investors and their own may no longer be aligned. There currently is no mechanism to realign those interests unless the manager brings in an independent party to insure best practices.
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