By Henny Sender in New York
Published: January 14 2009
GoldenTree Asset Management, a credit hedge fund, is offering investors who want to withdraw money securities instead of cash, triggering protests from those who in many cases lack means to dispose of such instruments.
Hedge funds such as GoldenTree warn investors in offering documents that they have the right to pay investors back "in kind" not cash. Such payments in kind, however, have been highly unusual until the current credit crisis, which has led hedge funds to place a variety of restrictions on investors trying to withdraw their money.
In a letter to investors last month, GoldenTree said "withdrawing partners that do not elect to revoke their withdrawal request will receive their proceeds primarily in kind. It is unlikely that any cash will be distributed."
This could be a problem for endowments that have little or no capability to hedge, trade or sell illiquid debt instruments. The GoldenTree letter said: "We can provide no assurances that these assets will be saleable and will no longer provide any management oversight or advice regarding such assets.