Cerberus Capital Management LLC, the $27 billion investment firm founded by billionaire Stephen Feinberg, limited investor withdrawals from one of its hedge funds after it lost 16 percent this year through November, Bloomberg reported.
The restrictions, known as gates, were triggered after clients sought to pull more than 16.5 percent of their money from Cerberus Partners LP by the end of the year, according to a Dec. 19 letter sent to clients. Cerberus said investors could get 20 percent of their year-end redemption requests, while the limits on the rest will last as long as a year.
"This is a very hard decision for us, and the realization that taking these steps is now necessary is deeply disappointing," the firm said in the letter, which was signed by Feinberg and William Richter, a senior managing director.
Hedge funds including Magnetar Capital LLC, D.E. Shaw & Co. LP and Farallon Capital Management LLC have already imposed gates so they wouldn't be forced to raise cash by liquidating assets at distressed prices. Hedge funds are finishing their worst year on record amid slumping stock and commodity markets and a freeze on credit.
The Cerberus fund lost 12.18 percent in October and November, the firm said. Jim Olecki, a spokesman for Cerberus, declined to comment. CNBC reported the redemption move earlier today.
The firm said it will waive 60 percent of the incentive fee, or its cut of investment profits, for 12 months after recouping losses. The waiver is for money that remains in the fund as of Dec. 31, Cerberus said.