JPMorgan's Highbridge investors seek withdrawal: report

(Reuters) - JPMorgan Chase & Co (JPM.N) is set to miss out on hundreds of millions of dollars in fees as Highbridge Capital Management's investors have asked to withdraw 36 percent of the assets from its flagship fund, the Wall Street Journal reported.

Highbridge Capital, which helped its owner JPMorgan Chase become one of the biggest hedge-fund managers in the world, has shrunk considerably this year and now many investors want out, the paper said.

The exodus, combined with investment losses, could reduce the once-$15 billion fund to $6 billion, the paper said citing people familiar with the fund.

To get investors to stay, Highbridge is offering reduced fees and other incentives, and clients who have asked to pull money won't get it all back immediately, the paper said.

To avoid a forced sale of assets in a weak market, Highbridge will first dole out 30 percent of the withdrawals in cash and investors will have to wait a year or more for the rest, the paper said citing people familiar with the terms.

The turmoil in the convertible-bond market, one of Highbridge's primary areas of focus, has contributed to a roughly 25 percent performance decline in the firm's biggest multistrategy fund this year, the paper said.

In 2006, the multistrategy fund gained about 23 percent and finished the year with roughly $9 billion, generating more than $500 million in fees for Highbridge, and about $160 million of that went to JPMorgan, the paper said, citing a person familiar with the fund.

JPMorgan owns about 75 percent of Highbridge. The bank first bought a controlling stake in the hedge-fund firm in September 2004 for more than $1 billion, the paper said.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Jarshad Kakkrakandy)