Oct. 20 (Bloomberg) -- Millennium Global Investments Ltd., the London-based money manager founded by former Goldman Sachs Group Inc. executive Michael Huttman, is liquidating a hedge fund that buys emerging-market debt after lenders withdrew credit, according to two people familiar with the situation.

The firm started selling assets of Millennium Global Emerging Credit Fund Ltd. last week, said one of the people, who asked not to be identified because the information is private. Tim Draper, a spokesman for Millennium, declined to comment.

``We're going to see a lot more liquidations,'' said K. Daniel Libby, a manager at Greenwich, Connecticut-based Sands Brothers Asset Management LLC, which invests in hedge funds. ``Hedge funds that don't have high amounts of cash on hand are going to be most at risk.''

Hedge funds focusing on emerging markets have lost 22 percent on average this year, according to data compiled by Hedge Fund Research Inc. Emerging-markets stocks and bonds have fallen, led by China, Russia and Brazil, as commodity prices plunged and investors shunned riskier assets on concern the global economy is entering a recession. The MSCI Emerging Markets Index has plunged 53 percent this year.

Millennium, which manages $15 billion, was founded in 1994 by Huttman, who had started Goldman Sachs' asset-management business in London during his four years at the firm. Prior to Goldman, Huttman spent seven years at JPMorgan Chase & Co., where he managed global fixed-income portfolios.

Apax Partners Worldwide LLP co-founder Ronald Cohen bought a stake in Millennium in July, joining Lord Jacob Rothschild who has been on the firm's advisory board since it was founded.

Fund Gains

The emerging-markets credit fund, one of six hedge funds managed by Millennium, had $818 million in assets as of Aug. 29, according to data compiled by Bloomberg. It gained 13 percent for the year and 25 percent annually since it was started in November 2006.

The fund was run by Michael Balboa, who had worked at London-based hedge fund Rainbow Advisory Services Ltd. from 2003 to 2006. Earlier, he worked at Greenwich Europe Ltd. as a manager of emerging markets sales and trading. Balboa previously worked at Strategos Fund Ltd., and was an emerging-markets bond analyst at Salomon Brothers Inc.

Hedge funds are suffering amid the turmoil in global financial markets that started with the meltdown in U.S. subprime mortgages. An estimated 700 funds may go out of business by the end of the year, an increase of 24 percent from 2007, according to Hedge Fund Research.

Highland Capital Management LP, based in Dallas, last week shut its flagship Highland Crusader Fund and another fund. Barclays Capital Inc. seized $642 million of leveraged loans from Highland.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

Last Updated: October 20, 2008 14:32 EDT