Absolute Capital Says Investors Back Changes to Funds

Absolute Capital Management Holdings Ltd., the hedge-fund manager that halted withdrawals after its investment chief quit, said shareholders in four funds backed a restructuring that restricts redemptions for a year.

Absolute Capital stopped withdrawals from seven equity funds after co-founder and co-chief investment officer Florian Homm, 48, quit last month. Following Homm's abrupt departure the company's shares dropped by two-thirds and investors tried to remove $100 million.

The day after Homm left, the company told investors that the funds held over-the-counter U.S. stocks that couldn't be sold at the prices the firm had on its books. During meetings in the Cayman Islands on Oct. 27, investors in four funds voted in favor of restricting withdrawals to allow time to sell the illiquid securities, the company said in a Regulatory News Service statement today.

``The investors are being held hostage,'' said Colin McLean, who helps oversee about $1.8 billion at SVM Asset Management in Edinburgh. ``They didn't really have a choice.''

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