Drake Puts Brakes On Redemptions After Big Losses

Jan 2 2008 | 12:03pm ET

Drake Management is sharply restricting redemptions from its flagship hedge fund after a disastrous autumn threatened the fund’s very existence.

In a letter to investors last week, Drake said it would honor only about 25% of requested withdrawals from its $4 billion Global Opportunities Fund, which was down almost 24% through November. New York-based Drake did not say how much investors had sought to pull, but the firm has an arrangement with its lenders that would have allowed them to seize its collateral had the fund’s net assets dropped by 30%. Drake said an agreement with those lenders is allowing the redemptions to go forward.

“This decision was made only after we attempted to convince redeeming investors to voluntarily rescind their redemption requests,” the letter, dated Dec. 28, said.

Drake said the fund was down 23.7% through November. Global Opportunities, which returned better than 40% last year, had reportedly been in positive ground as late as September, before dropping more than 10% in October. Through October, the fund was down 9.91%.

The $13 billion firm said redemptions will not be limited or suspended at its other funds. But that doesn’t mean they’ve escaped unscathed: Drake’s $1.74 billion multi-strategy Absolute Return Fund is down 11.5% through November.

 


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