Hedge funds are increasingly moving to restrict investor outflows following pressure from a combination of tightening credit lines, illiquid investments and investor redemptions, industry experts told Reuters. Many funds are using gates, which can typically limit investor exits to between 10 and 25% of assets per quarter. Another method used by funds is to suspend investor redemptions entirely so the managers don't have to undertake a fire sale of assets in difficult markets to pay exiting investors.

"We see a lot of situations that aren't total write-offs but where it's more a question of suspending dealing or a gate," said one fund of hedge funds manager. Prime brokers have become increasingly concerned in recent months about funds, particularly in the credit area. Last week London-based hedge fund firm Peloton Partners informed investors that it was liquidating its USD 2 billion ABS Fund after some 14 lender banks pulled back on credit. The fund blamed its lenders for "severe" markdowns in the value of its assets.