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West Palm Beach (HedgeCo.net) - In an effort to head off a forced asset sale, Windmill Management’s SageCrest Finance and SageCrest II filed for Chapter 11 bankruptcy after its assets fell sharply.

The hedge fund filed at U.S. Bankruptcy Court in Bridgeport, Conn. In a letter to investors, The fund said that the bankruptcy process would give SageCrest the time necessary to conduct an orderly liquidation of their assets to maximise the return to investors.

The fund described its investment strategy as making short-term loans to small- and mid-sized firms that cannot secure them from banks and specialty lenders. "Our position in a market where lending opportunities continue to outpace sources of capital provides an ideal point of departure for growth." The SageCrest website says, "Our investments target asset-rich and undervalued situations overlooked by, and with limited access to, the mainstream capital markets."

In its bankruptcy filing, SageCrest claimed fewer than 49 creditors and debts of between $1 million and $10 million. The hedge fund, which once boasted assets of as much as $650 million, said it now had between $50 million and $100 million.

Alex Akesson

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The Advocate - A Greenwich hedge fund has become ensnared in a legal dispute with one of its investors after refusing to allow the firm to withdraw the $5 million originally invested in the fund.

SageCrest LLC, a Greenwich hedge fund that at one point controlled about $990 million in assets, has been sued by Wood Creek Capital Management, a New Haven-based hedge fund that for more than a year has been seeking to redeem the $5 million it invested in SageCrest.

In a court documents filed in state Superior Court in Stamford last week, Wood Creek officials claimed SageCrest, which is managed by Windmill Management LLC, also of Greenwich, rescinded on agreement to return the $5 million to the New Haven firm, which was requested after the Greenwich firm started posting unsatisfactory returns last year.

In a separate declaratory judgment filed in Delaware courts, the state where SageCrest was organized, the Greenwich hedge fund claimed its original contract with Wood Creek gave them the right to refuse any redemption requests if "the redemption would have an adverse effect" on the fund.

SageCrest "needed to gate the fund," said Bill Brewer, an attorney for the Greenwich fund and a partner at Bickel & Brewer, a law firm with offices in New York and Dallas.

Hedge funds typically throw up their "gates" as a way to preserve liquidity in adverse market conditions.

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