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Marin Hedge Fund Puts Limits On Investors (From THE WALL STREET JOURNAL)
By Henny Sender and David Reilly
Marin Capital Partners LP, a $2 billion hedge-fund firm on the West Coast, is imposing limits on investors wanting to pull their money, several investors say. The Marin fund specializes in the trading of corporate bonds that convert into equity. The new limits have triggered fears that the pressure to raise money for nervous investors by selling bonds may lead to a cascade of problems for other hedge funds and the convertible-bond market itself. Marin's situation comes at a time when returns have been falling for most funds trading convertible bonds. What makes many market participants nervous is that Marin's performance hasn't been particularly bad. Year to date, the fund is down less than 2%, according to investors. Marin's dilemma is that of the hedge-fund industry writ large. Disillusioned investors want to pull money from strategies, such as trading convertible bonds, that haven't been producing desired returns. But if many investors take their money out at the same time, the fund manager is forced to sell some holdings, which can lead in turn to losses, sparking further withdrawals. In addition, the Marin case has received a lot of attention in the hedge-fund community because it demonstrates how concerns over one fund can swiftly be transmitted to seemingly unrelated funds. To keep requests for redemptions from becoming a rout, at the end of September Marin told investors they can withdraw no more than 40% of their money......
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