Investors pull record $155 billion out of hedge funds

[Joanne98]

BOSTON (Reuters) - Investors pulled a record $155 billion out of hedge funds last year, punishing the once red-hot asset class for delivering its worst-ever returns, according to numbers released on Wednesday.

Hedge funds around the world now manage an estimated $1.4 trillion, the same sum they managed in 2006 and far less than the $1.93 trillion they invested in the middle of 2008, Chicago-based tracking firm Hedge Fund Research said.

This is only the second time since 1990 that the exclusive and often secretive hedge fund industry suffered net outflows for the full year, HFR said.

Consulting firm Hennessee Group, which also tracks performance and asset flows, said last year was the worst for the industry in terms of performance and redemptions since 1987.

HFR reported that investors simply wanted their money back last year, paying little attention to the size of the hedge fund they were invested with, its particular strategy, or how the hedge fund was performing.

http://www.reuters.com/article/americasDealsNews/idUSTRE50K5H220090121

That was only the investors who could get their money out. A lot of investors tried but couldn't. We'll see want happens now. Hedge fund PONZI SCHEMES!

[Joanne98]

1. Here's the next Madoff scandal!

Steel Partners sued for fraud

BOSTON (Reuters) - Bank of America (BAC.N) and ACF Industries have sued Steel Partners accusing the activist hedge fund committed fraud by not properly advising investors of its plans to go public, according to court documents.

Steel Partners is trying to turn its largest portfolio into a publicly traded partnership.

The lawsuit charges that the hedge fund was not in compliance with its obligations to investors as it pursued its plan to become a publicly traded partnership because it failed to give ample notice of the plan or an opportunity to vote on the proposal.

The lawsuit was filed in Delaware Chancery Court on Tuesday, and Reuters obtained a copy on Wednesday.

Bank of America, acting as master trustee for ACF Industries' employee benefits plan, charged that Steel Partners and its manager, Warren Lichtenstein, "pulled off a classic 'bait and switch' by stripping investors of what they had purchased and replacing it with something entirely different."

ACF, a manufacturer of railcars and railcar components, and, according to the documents, affiliated with billionaire investor Carl Icahn, invested $15 million in 2005 with Steel Partners Offshore Fund Ltd, which became Steel Partners II (Offshore) Ltd.

Bank of America referred calls to attorney Keith Schaitkin at Icahn Associates, who referred Reuters to the court documents.

http://www.reuters.com/article/hedgeFundsNews/idUSLNE50E01Y20090115