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Cerberus faces $5.5bn in fund withdrawals

Anonymous Coward
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08/30/2009 12:10 AM
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Cerberus faces $5.5bn in fund withdrawals
Cerberus is facing a flood of withdrawal requests from investors in its core hedge funds, the Financial Times has learned.

Investors are understood to be asking to withdraw more than $5.5bn, which would represent 71 per cent of the assets in the funds, which currently hold about $7.7bn in a domestic and foreign vehicle.

The development was first reported by the Wall Street Journal.

The hedge funds were restructured last month in response to initial withdrawal requests.

Subsequently, more investors have sought to pull out their funds than the firm anticipated. Last year Cerberus’ investments lost nearly 25 per cent of their value, while hedge funds on average were down by 19 per cent.

Stephen Feinberg, Cerberus chief executive, and William Richter, its co-founder, wrote in a letter to clients that investors were fleeing the fund because of a liquidity crisis and they were “surprised by this response”, according to the Wall Street Journal.

A Cerberus spokesman said that he was not authorised to distribute the letter and declined to comment further. Investors in Cerberus’ funds have been disappointed by the group’s performance during the downturn, especially its investment in Chrysler, which required a bail-out by the US government, and GMAC, the financing arm of General Motors.

In 2007 Cerberus used $7.4bn to take an 80 per cent equity stake in Chrysler.

Earlier this year Cerberus, which specialises in cutting costs from struggling companies, was forced to turn the scalpel on itself by cutting 10 per cent of its workforce.

Hedge funds started to recover in the second quarter of this year.

According to Hedge Fund Research, the total assets invested in the industry have jumped by $100bn to $1,430bn in the second three months of the year and funds invested gained 9 per cent, the sharpest rise in a decade. Cerberus Partners is up by 3 per cent this year. The Cerberus hedge funds that are now facing pressure represent a third of the group’s assets.

Cerberus is charging investors an annual management fee of 0.5 per cent for the new vehicle it has introduced to wind down the illiquid assets.
[link to www.ft.com]
Anonymous Coward
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08/30/2009 11:59 AM
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Re: Cerberus faces $5.5bn in fund withdrawals
These are big players who are drawing down on the funds. Some serious discussion between parties. Sounds like a "no confidence" vote to me.