GLG Partners, the London-based hedge fund reeling from the departure of Greg Coffey, is expecting to lose more than $4 billion (£2.05 billion) in investment assets as disillusioned investors follow the star Australian fund manager out of the door.

Noam Gottesman, GLG's chairman and chief executive, told shareholders yesterday that the hedge fund had suffered $1.7 billion of investor redemptions since late April, when Mr Coffey left the firm to set up on his own.

Mr Coffey, an emerging markets specialist thought to have collected $300 million in performance fees last year, managed about $7 billion of the $24.6 billion that GLG has under management. Mr Coffey, who generated spectacular returns for GLG's fund investors, spurned a cash-and-shares payout worth a further $250 million to go it alone. Mr Gottesman admitted that as little as $2 billion of Mr Coffey's former assets could remain after October, when he formally leaves after an agreed handover period.

“Clearly, he managed $6.3 billion as at the end of April and I would expect the bulk to remain until October,” he said. “Once Greg goes, I would expect to retain at the very least $2 billion of that money, and hopefully more.”

Mr Gottesman said that the total potential loss of future assets, which could reach $4.3 billion in the coming months, represented a worst-case scenario. GLG sources emphasised that the fund was confident investors could be retained and that the valuation also reflected market conditions.

Mr Gottesman said he was resigned to losing the rest of Mr Coffey's team, thought to have been about 12-strong before he resigned but now comprises nine staff. To add to GLG's woes, market turbulence in March and April left its funds' performance in tatters. For the year to date, including Mr Coffey's fund, GLG funds are down 7 per cent, with its alternatives assets including hedge funds down 7.6 per cent, Mr Gottesman said. Mr Coffey's funds, which drew on individual high-net- worth investors, Middle Eastern and sovereign wealth funds, are down just over 19 per cent for the year to date.

Mr Gottesman insisted that other GLG funds were performing well. It was “business as usual” until October and there was no risk of another “Coffey-type event”, he said.

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