* New funds will have a three-year lock-up period
* Many investors have decided to leave some funds
(Updates with company's statement)
NEW YORK, Sept 2 Cerberus Capital Management LP
[CBS.UL] said on Wednesday it will prohibit investors in new
hedge funds from withdrawing money for three years.
Earlier on Wednesday, the Financial Times reported Cerberus
planned to bar withdrawals in two new funds to prevent the
outflows that followed its loss-making acquisitions of carmaker
Chrysler and financial services company GMAC.
"The three-year lock-up period will apply to all new hedge
funds," Timothy Price, managing director and spokesman for
Cerberus, said in a statement to Reuters.
On Tuesday, Cerberus dismissed market speculation that some
of its hedge funds were in danger of default.
High-profile investment losses at Cerberus prompted
investors recently to seek the withdrawal of $4.77 billion from
two of its hedge funds. That represents about 60 percent of the
$7.9 billion managed by Cerberus Partners LP and Cerberus
International LP, and 19 percent of Cerberus' total $24.3
billion in assets managed through a dozen funds.
Cerberus built a strong track record by quietly investing
in hard-hit companies, debt and real estate. Its winning streak
ended when it led $15 billion of investments for control of
Chrysler and GMAC, the former finance arm of General Motors.
Cerberus wrote down most of its Chrysler investment when
the automaker headed into bankruptcy earlier this year, while
its GMAC stake was slammed when the U.S. government bailed out
The Cerberus Partners LP and Cerberus International LP
funds lost more than 20 percent last year, blocked clients from
withdrawing funds in December, and halted making new
investments during the fourth quarter. The funds are little
changed this year.
Recently, Cerberus asked clients of the two funds whether
they wanted to stick with their investments, at a lower fee, or
depart. Investors with more than 70 percent of fund assets not
controlled by Cerberus partners elected to pull out.
"The redemption requests were driven primarily by liquidity
requirements, not Chrysler and GMAC. They are a result of
global economic conditions," Price said.
(Reporting by Megan Davies; Additional reporting by Juan
Lagorio; Editing by Andre Grenon, Gary Hill)