Morgan Creek Chief's Fund Of Funds Gates Redemptions

Oct 31 2012 | 11:42am ET

A fund of hedge funds run by Morgan Creek Capital Management founder Mark Yusko has imposed withdrawal restrictions after investors yanked nearly a quarter of its assets.

The Endowment Fund, which Yusko set up in 2003—before he left the University of North Carolina at Chapel Hill's endowment—with Salient Partners, told clients on Friday that it would gate redemptions. Investors will now be allowed to withdraw only a limited amount of money each quarter from the $3.3 billion fund, which has seen more than $1 billion in redemptions this year.

In a letter to investors, Endowment Fund said the temporary move would reduce the amount investors can withdraw each quarter to 5% of assets, half of the previous level.

While many hedge funds and funds of funds imposed gates during the financial crisis, the Endowment Fund's move is among the first to come after that crisis, according to The New York Times.

The Endowment Fund invests with some of the biggest names in the hedge fund industry, including Eton Park Capital Management, Harbinger Capital Partners and Paulson & Co. Once a selling point, that access hasn't helped returns much lately, with the fund losing 4.1% last year. What's more, some 35% of the fund's assets are in illiquid investments; Endowment Fund wrote that "further significant repurchases at this time would be incompatible with managing the fund in accordance with its stated objectives."

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