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last week, Wood Creek officials claimed SageCrest, which is managed by Windmill Management LLC, also of Greenwich, rescinded on agreement to return the $5 million to the New Haven firm, which was requested after the Greenwich firm started posting unsatisfactory returns last year.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.