Citadel Plans To Allow Some Redemptions, Eventually

Feb 17 2009 | 1:26am ET

Two months after putting his flagship hedge funds into a deep freeze, Citadel Investment Group’s Kenneth Griffin is sending signs of a slight thaw.

Citing the fact that the world economy “has seen only modest improvement since year-end,” Griffin wrote to investors last week, Citadel said the suspension of redemptions from the Kensington and Wellington funds would continue. But he said the firm had plans for a “distribution program” that could get investors in the funds, which lost more than half their value last year, some of their money back, albeit very slowly.

“As our balance sheet continues to strengthen and the liquidity of our investment portfolio continues to improve, we intend to initiate a ‘distribution program’ and make periodic distributions to investors who desire liquidity,” Griffin wrote.

Citadel will determine at the end of each quarter how much investors will be able to get back, with threshold levels declining over time. Those assets freed up at the end of each quarter will be allocated to investors on a pro-rate basis.

The firm did not lay out a schedule for the withdrawal thresholds.

“We have significantly reduced our holdings of illiquid assets, and will continue to do so from a position of strength, in a manner that protects the interests of our investors and the funds,” the letter said. Griffin expressed his belief that the Kensington and Wellington funds could recoup their huge losses of last year, and the funds got off on the right foot in January, returning about 5%.

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