Telegraph.co.uk – In the biggest-ever round of redemptions, funds around the world are braced to give back between 10pc and 50pc of their assets under management.

Hedge funds were faced with a slew of redemption notices at the start of the quarter, but investors were prepared not to withdraw their money if returns improved, according to one prime broker. He said many would now be forced to close.

None of the strategies used by hedge funds produced a positive return in September. According to the Dow Jones Hedge Fund Indexes , equity market-neutral funds, which often try to manage risk by shorting a stock in one sector and going long on one if its competitors, have fallen 1.85pc this month, while convertible arbitrage securities have dropped 7.96pc and distressed securities by 7.34pc. That compares with a 9pc decline by the FTSE 100. Hedge fund of funds, which are designed to spread risk, are expected to face the biggest redemptions.

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West Palm Beach (HedgeCo.net)- A preliminary injunction has ordered two officers of activist hedge fund Costa Brava Partnership III LP of Boston to cease and desist, refraining from all contact with former, current and future auditors of Telos Corporation.

Costa Brava officers, Andrew R. Siegel and Seth W. Hamot, who sit on Telos’ board of directors, were accused of making repeated threats of litigation against the company’s last two independent auditors. Both auditors resigned their engagements with Telos as a result of the conduct of Hamot and Siegel even though neither auditor had found fault with Telos on any accounting issues.

The actions were seen by Telos as tactics to break up the company on order to secure redemption of their public preferred stock.

In his order, Judge Matricciani also wrote that "Telos is likely to demonstrate that their (Hamot and Siegel) conduct was not just wrongful, but unlawful." The judge stated that the communications of Hamot and Siegel with Reznick may have violated Sarbanes-Oxley section 303 and SEC Rule 13b2-2, "providing another basis for liability for tortious interference with business or economic relations."

Attorneys for Hamot and Siegel have said they will file an appeal of the preliminary injunction with the Court of Special Appeals of Maryland.

Alex Akesson

alex@hedgeco.net

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