Sentinel Management Group wants to stop client redemptions in an attempt to stem losses amid the ongoing credit crisis, telling clients it has asked the Commodity Futures Trading Commission for permission to halt withdrawals because the liquidity crisis in credit markets has made it “virtually impossible” to properly price and trade securities. “We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients,” the firm said in a letter to clients. “We do not see an alternative and we don’t believe it is in anyone’s best interest if a run on Sentinel took place and we were in a forced liquidation mode.” Sentinel, which manages cash for commodity and currency traders, hedge funds and other investors declined to comment. The CFTC said it had no authority to act on such a request, while one official reportedly said U.S. futures exchanges including the Chicago Board of Trade and New York Mercantile Exchange were trying to get other companies to step in to help ease Sentinel’s redemption concerns. The official noted that the exchanges have said there was no indication the matter would spread as the bigger brokers have much higher minimal capital requirements than does Sentinel. He added that Sentinel’s refusal to make redemptions appears to violate federal commodities laws, but that the CFTC wasn’t likely to exacerbate the situation by taking an enforcement action and freezing Sentinel’s assets. Other firms have halted hedge fund redemptions in recent weeks, and on Tuesday several Canadian investment trusts had trouble repaying short-term loans. Sentinel’s Web site says the firm invests only in the highest quality and most liquid securities and that investors may take out all their money at any time.Sources: Wall Street Journal, MarketWatch, Reuters
Commentary: This Is (Potentially) Huge: Sentinel’s Troubles Could Spread • Sentinel: Excuses Don’t Fly • Quant Fund Pain: Is The Worst Over?

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