Hedge Fund Marshall Wace Joins Its Rivals in Keeping Client Cash Longer

(Bloomberg) -- Hedge fund Marshall Wace is locking in capital for longer and considering returning some cash to investors.

The London-based investment firm will allow quarterly withdrawals from its MW Eureka fund instead of monthly and is introducing a 25% limit, according to a letter to investors seen by Bloomberg. Under the new policy, it will take a year for investors to fully redeem their holdings.

A representative for Marshall Wace, which manages more than $55 billion in assets, declined to comment.

Marshall Wace, which is best known for running liquid hedge fund strategies betting on stocks, is joining peers in pushing clients to invest for longer with greater restrictions. Izzy Englander’s Millennium Management told investors earlier this year that it had raised a record $10 billion for a fund that takes a minimum of five years to exit.

The Eureka fund is “changing the liquidity terms to what we consider to be the current industry standard,” the managers said in the letter. “We are sorry for any difficulties that this may cause with specific investors who are themselves subject to strict liquidity constraints.”

The changes will be effective after April 1, 2022, according to the letter. Managers may also return some capital to investors next year to reduce the size of the fund unless the new policy prompts some clients to exit on their own, they said. 

Marshall Wace noted in the letter that its relaxed liquidity constraints led to some clients pulling money in the 2008 global financial crisis.

“Although we obviously do not anticipate a repetition of the GFC any time soon, we consider it prudent to protect the fund and its investors against such a scenario,” the managers wrote.

The Eureka fund has returned 10% through November, according to the letter. That compares with an average of 10.8% for equity hedge funds globally over the same period, according to the Bloomberg Equity Hedge Fund Index.

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