WHEN BLUE MOUNTAIN chief executive Andrew Feldstein wrote to investors in the firms Credit Alternatives Fund on November 3 informing them of his redemption and recapitalization plan for the $3.1 billion fund, it was a clear sign that the difficulties faced by credit fund managers had reached a new intensity. The Blue Mountain Credit Alternatives fund is one of the largest and most successful credit hedge funds in the market, having returned 17.4% in 2006 and 8.8% in 2007. But on October 31, the fund was down 2.4% year to date. Feldstein wrote that he was moved to take action on redemptions from the fund, despite "both our distinguished performance through the credit crisis and some of the best investment opportunities weve ever seen".
All investors in the fund were given the stark choice of redeeming their existing investment or exchanging it...
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