Clients are fleeing hedge funds run by Cerberus Capital Management in droves.  The Wall Street Journal is reporting that investors have are withdrawing $5.5 billion, or about 71% of the hedge fund assets amidst investment losses and clients' need for liquidity.  The firm's main hedge fund, Cerberus Partners, lost 24.5% in 2008.  Since the fourth quarter of 2008 Cerberus has received several withdrawal requests from clients looking to liquidate their holdings amidst the global ecnomic crisis.  However, Cerberus refused to return cash, citing weak market conditions for asset sales.  In July 2009 Cerberus gave investors a window to withdraw funds which has led to a mass exodus of investors.

Cerberus' hedge fund problems are symptomatic of the hedge fund industry as a whole as investors have withdrawn $300 billion from hedge funds through June 30, 2009.  Hedge fund industry assets peaked at $1.9 trillion in 2007.  Several other high profile hedge funds have also closed their doors since the global economic crisis occurred.  Cerberus made a splash with its bold acquisitions of Chrysler and GMAC.  Both investments went sour when Chrysler applied for bankruptcy and GMAC was was bailed out with billions of government aid in a deal which required Cerberus to give up control of the company.  Implosions of hedge funds may be a harbinger of things to come as (i) investment returns may not justify the risk taken, (ii) illiquidity of investments leave clients unable to sell their holdings quickly, and (iii) additonal regulatory scrutiny looks askance on investment risk taken by hedge funds and the qualifications of the underlying fund managers.  It just goes to show that "you should not mistake success for a bull market".  The link to the WSJ article is here:  http://online.wsj.com/article/SB125148681701267563.html?mod=rss_whats_news_us