Toronto-based Epic Capital Management is shuttering its flagship hedge fund as returns sink and investors head for the door.

Epic, which focuses on mid-cap Canadian companies, has seen the flagship fall by 38% this year, leading many investors to seek redemptions, the Globe and Mail reports. The fund's assets have fallen by C$100 million amidst the market volatility, leading the firm to seek investor approval for a liquidation.

"We wanted to do it while we could and didn't have a gun to our head," Epic CEO David Fawcett said.

The closure, which will also lead to the layoff of five of Epic's six employees, is also the deathknell for another hedge fund, which Epic manages for Toronto-based Arrow Hedge Partners. The C$35 million Arrow Epic Fund is to be wound down alongside the Epic fund.

"It's not our decision, but if they are going to shut down their two other funds, we have no choice," Arrow CEO James McGovern said. "Otherwise, our investors will be disadvantaged."