NEW YORK: King Street Capital Management tells clients it’s significantly restricting withdrawals from its main hedge fund, moving investors who want to exit to a separate vehicle that will sell off the assets over time.
The 31-year-old fund has struggled with lackluster performance, fleeing clients and an exodus of long-tenured staff.
It now manages less than US$8bil, down from US$20bil a little more than a decade ago.
King Street’s move “will enable us to manage and liquidate assets in an orderly fashion and to monetise positions at the most attractive exit points”, founder Brian Higgins, 61, wrote in a letter to investors.
Investors will get a small portion of their redemption in cash sometime in the third quarter, a person familiar with the process said.
The letter didn’t say what fees that they will pay, nor how long the firm will curb withdrawals, which clients can request quarterly.
A representative for the firm declined to comment.
The shrinking of hedge fund assets has forced King Street into other, less lucrative businesses.
More than 40% of its US$30bil under management is invested in collateralised loan obligations, where fees are more in line with mutual funds than the hedge fund business that enriched King Street’s founders.
The firm was only collecting full fees on US$5bil of the assets in its flagship fund as of June 1, Bloomberg previously reported.
Like many of his rivals, Higgins doesn’t pay fees on his own money that’s invested in the fund, and clients who were already in the process of exiting pay lower fees.
Higgins has taken steps to help boost returns, including streamlining decision-making and focusing more on King Street’s core credit strategies.
Early this year, he named partners Domenico Lia and Jeff Rosenbaum as co-portfolio managers of the hedge fund.
Lia has been with the firm since 2019. Rosenbaum joined in 2024.
More than 40 employees left the firm in 2026, some were fired and others chose to exit.
King Street still has about 250 personnel, following a recent hiring spree.
One of the new additions is Sean Monaghan, a managing director for capital markets, who will join King Street next month, according to a person familiar with the firm.
Some of the fund’s investments made since Dec 1 have significantly outperformed older bets, Higgins said in the letter.
Still, the fund lost 0.5% this year through June, following a gain of just 2.4% in 2025.
Higgins is curtailing withdrawals because he believes the firm can capitalise on “a complex market backdrop of elevated valuations, global macro uncertainty, persistent inflation and consumer softness,” he wrote.
“Against this backdrop, our ability to serve as a solutions provider and rotate capital opportunistically is a key differentiator.” — Bloomberg