Highbridge Asia Hedge Fund Said to Limit Withdrawals

Date: Tuesday, December 2, 2008
Author: Saijel Kishan, Bloomberg

Highbridge Capital Management LLC, the hedge fund company owned by JPMorgan Chase & Co., is limiting client withdrawal requests to avoid selling assets at distressed prices, according to a person familiar with the matter.

Investors who ask for withdrawals from the $1.9 billion Asia Opportunities Fund this quarter will get half their money by the end of January, said the person, who asked not to be identified because the information is private. The fund, which lost 32 percent this year through October, will return the rest within 12 to 18 months.

New York-based Highbridge, run by Glenn Dubin and Henry Swieca, will segregate hard-to-sell assets and sell them off over time in a bet that prices will recover and clients will get back more money. Firms including Tudor Investment Corp. and GLG Partners Inc. have taken similar steps in the past month.

“This seems to be a much fairer alternative to fully halting redemptions or shuttering the fund,” said Tanya Styblo Beder, chairman of financial consultants SBCC Group in New York.

Mary Sedarat, a spokeswoman for Highbridge, declined to comment. The investment firm has about $20 billion of assets.

Investors have asked to withdraw 36 percent of assets from Highbridge’s flagship multistrategy fund, the Wall Street Journal said today, citing people familiar with the situation. This may shrink the fund, which once had $15 billion of assets, to $6 billion, the newspaper said.

Managers of Highbridge’s multistrategy fund keep about 25 percent of its profit, more than the industry average of about 20 percent, the Journal said. Half of the performance fees go to JPMorgan, and investment losses and client withdrawals will limit the contribution, the newspaper said.

Head Trader

The Asia Opportunities Fund is run by Carl Huttenlocher, previously the head trader at Long-Term Capital Management LP, the hedge fund that imploded 10 years ago after a debt default by Russia. Fees for remaining investors will be cut to 1.5 percent from the industry standard of 2 percent, said the person.

The fund gained 19 percent last year, 15 percent in 2006 and 7 percent in the previous year when it was started. JPMorgan, the largest U.S. bank by assets, bought a majority stake in New York-based Highbridge four years ago and increased its ownership to 78 percent in January.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net