What to make of the move by Shumway Capital to return all capital to its limited partners? Well, it comes at a time when the balance of power has swung a bit toward the investors. The financial crisis pushed redemption issues to the fore, and funds have become more investor-friendly.

"In November, (founder Chris) Shumway said he would take on the chairman role and named Tom Wilcox as chief investment officer. He also changed a 'key man' clause in the firm's contract with investors, known as a Private Placement Memorandum, or PPM, according to an investor who spoke on condition of anonymity. Key man clauses generally allow investors to withdraw money quicker from hedge funds if the main investment manager leaves or steps away from overseeing the firm's money," explains MarketWatch.

Wilcox had Shumway's confidence, but for whatever reason investors ended up using the key man clause to redeem funds en masse. Investors may have been objecting to the way the transition was handled.

In any case, the redemptions led Shumway to call the game by returning all funds. "In a sense, these changes created more risk for many of you who committed to stay invested in SCP and makes short-term results of the fund a primary issue for us all," he wrote to investors. "As a result, it has become more difficult for us to focus on long-term investing as we have for the last nine years, which I believe has been a main driver of our success."

For more:
- here's the MarketWatch item

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