GoldenTree Says Redemptions Will Be Paid In Illiquid Securities

Jan 15 2009 | 2:05am ET

GoldenTree Asset Management, facing huge redemption requests, is responding with something of a threat. The New York credit hedge fund is not choosing the well-worn path of a withdrawal limit or suspension, but is instead offering to repay investors in kind.

GoldenTree told investors last month that those withdrawing their investments would receive securities in lieu of cash. The hedge fund invests primarily in credit derivatives, many of which are highly illiquid and would be difficult for investors to sell on the open market.

“Withdrawing partners that do not elect to revoke their withdrawal request will receive their proceeds primarily in kind,” GoldenTree wrote, according to the Financial Times. “It is unlikely that any cash will be distributed.”

“We can provide no assurances that these assets will be saleable and will no longer provide any management oversight or advice regarding such assets,” the letter went on.

The firm saw its hedge fund fall by almost one-third last year, and has received redemption requests totaling between 25% and 30% of what’s left.


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