Troubles mounted for some of the world’s biggest hedge funds on Thursday as Highland Capital Management told investors it was shutting down two of its funds and details emerged of big losses at TPG-Axon. The sector’s problems have created a vicious cycle in the markets as hedge funds sell holdings to return money to worried investors, triggering further price declines and prompting more withdrawals. This week, Highland began trying to sell a portfolio of loans with a nominal value of $640m. TPG-Axon – an affiliate of private equity firm TPG that had $16bn under management at its peak – told investors it was down 26% through September. Earlier, Ken Griffin, founder of Citadel Investment Group, told investors in a letter that September was the worst month in its history and to expect more volatility. Citadel, which has $18bn under management, estimated that its Kensington and Wellington funds were down 26-30% in the first week of October. In total, investors pulled at least $43bn from hedge funds in September, according to TrimTabs Investment Research.
