Cerberus Hedge Fund Caps Withdrawals After Loss
Monday, December 29, 2008 : PermalinkNew York (HedgeCo.Net) – Stephen Feinberg’s Cerberus Capital Management has followed in the footsteps of many faltering hedge funds this year, limiting client redemptions in one of its funds after investors moved to withdrawal 16.5 percent of their capital, according to a recent letter to investors.
The Cerberus Partners Fund is down 16 percent this year through the end of November. Cerberus said they would honor about 20 percent of the redemption requests, while others might have to wait a year to pull out their cash. However, they are planning on waiving 60 percent of the incentive fee for a year after the losses are made up for any money that is still in the fund as of December 31.
“This is a very hard decision for us, and the realization that taking these steps is now necessary is deeply disappointing,” said the letter.
Cerberus agreed to give its stake in Chrysler to creditors and employees as per an agreement with Uncle Sam for the auto manufacturer to receive a loan. Its ties with the U.S. auto industry, however, don’t end there. They also invest in GMAC, the financing sector of GMC. Both GMC and Chrysler have taken a beating this year, more so than any other American car maker, prompting them to seek a $15 billion bailout from the government.
Cerberus isn’t the only hedge fund choosing to halt redemptions this year. Around 80 reputable firms including Harbinger, Citadel, RAB and Blue Mountain have chosen to freeze funds in an effort to stave off withdrawals fueled by fear in a sour economy.
Fortunately, Cerberus has confirmed that none of their funds are directly or indirectly invested with Bernard Madoff, the Ponzi-schemer who is responsible for bilking $50 billion out of investors.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net
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Tags: accredited-investors, american car, auto manufacturer, bailout, bernard madoff, car maker, cerberus capital management, cerberus partners, hedgeco, incentive fee, partners fund, ponzi, redemption-requests, redemptions, reputable firms, schemer, stephen feinberg, u s auto
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