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Blue Mountain freezes fund in face of withdrawals

Reuters – Blue Mountain Capital Management LLC has temporarily halted redemptions at its largest hedge fund after clients asked to withdraw money despite its "distinguished" performance, according to a letter to its investors.

New York and London-based Blue Mountain said in the letter it had come up with a "redemption and recapitalization plan" to protect all its investors in the $3.1 billion Blue Mountain Credit Alternatives Fund.

The fund is down 2.4 percent year-to-date, the letter said, far less than the average fund which has lost 20 percent this year. Blue Mountain has a total of $5.5 billion assets under management.

The pressure on the credit fund came from some large fund-of-fund investors, "themselves facing liquidity pressures from their own investors," submitting significant redemption notices, the letter said.

"If we were to unwind or sell positions to meet current redemptions, the severe liquidation costs would be borne inequitably by the remaining investors," wrote CEO Andrew Feldstein in the letter, seen by Reuters.

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