Sentinel Management Group was the latest financial firm to disclose problems related to increasingly difficult conditions in U.S. credit markets, and provide stockholders another reason to sell off.
Sentinel manages cash for hedge funds and some brokers, mostly futures commission merchants, and invests about $1.5 billion in various bond portfolios. Stocks started selling off early on news of a letter to clients in which Sentinel officials said they had requested the Commodities Futures Trading Commission to allow them to suspend redemption.
CFTC spokesman Dennis Holden declined comment, but a CFTC official who requested anonymity said the regulator never received the letter and had asked the firm to issue a correction, but would not be in a position to allow the freezing of redemption.
As we were assured that these credit problems would not spread, we can be assured that there is more to come, said Bill McGowan, managing director at Interactive Brokers in Chicago.
CME Group said in a statement that Sentinel notified the CFTC it will not accept additional funds for investment. The exchange also noted that Sentinel is not a clearing member of CME Group or any other exchange.
National Futures Association spokesman Larry Dyekman said his industry group is monitoring Sentinels activities and has been in contact with the firm.