King Street Capital Management has tightened redemption terms for its flagship hedge fund, transferring investors seeking to exit into a separate vehicle that will liquidate assets over time as the firm seeks to stabilise performance and reposition the business, according to a report by Bloomberg.
In a letter to investors, founder Brian Higgins said the move is intended to allow the firm to unwind positions in an orderly manner and maximise value as assets are sold, rather than forcing disposals under redemption pressure.
Under the new arrangement, investors requesting withdrawals will receive an initial cash distribution during the third quarter, with the remaining assets transferred into a liquidation vehicle that will realise investments over time.
The decision comes as the veteran credit-focused hedge fund manager continues to grapple with declining assets, weaker investment performance and significant staff turnover.
King Street’s flagship hedge fund now manages less than $8bn, down from approximately $20bn more than a decade ago. Across the wider business, the firm oversees around $30bn, with more than 40% invested in collateralised loan obligation (CLO) strategies, which typically generate lower management fees than traditional hedge funds.
The firm’s main hedge fund has struggled to regain momentum, posting a loss of 0.5% during the first half of 2026 after returning just 2.4% in 2025. Higgins nevertheless told investors that investments made in recent months have performed significantly better than older positions, suggesting the portfolio repositioning is beginning to gain traction.
King Street has undertaken a broader restructuring this year aimed at improving performance. Earlier in 2026, Higgins appointed partners Domenico Lia and Jeff Rosenbaum as co-portfolio managers of the flagship fund, while simplifying the investment process and sharpening the firm’s focus on its core credit strategies.
The overhaul has coincided with substantial changes to the workforce. More than 40 employees have departed during the year, although the firm has also recruited new investment professionals as part of its rebuilding effort and continues to employ around 250 people.
Despite limiting investor withdrawals, Higgins argued that the current market environment presents attractive opportunities for experienced credit investors. He cited elevated asset valuations, macroeconomic uncertainty, persistent inflation and weakening consumer demand as conditions that favour active capital allocation and bespoke financing solutions.
