CG Carlyle Group Inc

Investors in Carlyle Group LP's Claren Road Asset Management asked to withdraw nearly $1 billion in the fourth quarter, according to people familiar with the matter, the latest in a string of setbacks for the hedge-fund firm.

The $950 million in withdrawals requested by investors before the quarterly deadline last week comes after nearly $2 billion in such requests were made in the third quarter. The firm is expected to have $1.25 billion under management as of Jan. 1, one of the people said, down from $8.5 billion as recently as September 2014.

Claren Road previously told clients that it would delay full payment of withdrawals requested in the fourth quarter, as it had with their third-quarter requests. The $1.25 billion under management as of January doesn't include funds that are to be paid back.

The delayed-repayment schedule, unusual since the financial crisis ended, has rankled some investors. The firm's executives have said they believe the extended payout is the best way to protect both remaining and redeeming investors. The firm has told clients it won't immediately pay back about two-thirds of the nearly $2 billion in withdrawals requested in the third quarter. It wasn't clear when fourth-quarter redemption requests will be paid in full.

The continued outflow of client money is the latest blow for Claren Road, a firm that wagers on and against debt and was known for its steady performance before notching several large losses starting in the fall. It also comes in a bruising year for hedge funds, when popular bets backfired, such as those made on an energy sector rebound stymied by a continuing slide in oil prices. Many hedge funds were hurt by bets on such health-care companies as Valeant Pharmaceuticals International Inc., which has come under scrutiny for its business and accounting practices.

Prominent fund managers, including William Ackman and Larry Robbins, have written letters to their investors warning them 2015 is likely to be the worst in their firms' histories, or apologizing for losses and saying they won't be taking any pay this year.

Hedge funds have gained an average of 0.3% for the year through November, according to research firm HFR Inc., compared with 3% by the S&P 500 over the same period, including dividends.

While the most recent outflows will significantly shrink the amount of money Claren Road continues to manage, people familiar with the matter said Claren Road likely will have a substantial amount of capital to manage for some time. Several clients had agreed earlier to lock up their money for several years in exchange for discounted fees, they said, and Claren Road partners and Carlyle executives are also invested in the firm.

Write to Juliet Chung at juliet.chung@wsj.com

(END) Dow Jones Newswires

December 21, 2015 16:05 ET (21:05 GMT)

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