Hedge fund Diamondback Capital is to close after investors asked for the return of USD520m – more than 25 per cent of the fund’s current assets.

Diamondback co-heads Richard Schimel and Larry Sapanski informed investors of the decision by letter on Thursday having seen assets shrink from around USD5bn two years ago to what would be less than USD1.45bn following the latest rash of redemption requests.

The firm, which was founded in 2005 by Schimel, Sapanski and Chad Loweth – all previously involved with Stephen A Cohen’s SAC Capital Advisors – has been involved in a US government insider trading investigation, although neither the firm nor its founder have ever been accused of any wrongdoing.

Former Diamondback portfolio manager Todd Newman was arrested in January and the firm subsequently agreed to pay USD9m to settle civil charges that Newman and former Diamondback analyst Jesse Tortora, had made illegal trades.