Facing heavy losses, US hedge fund group Ritchie Capital is barring investors from withdrawing their money from the $2 billion portfolio, underscoring how some hedge fund operators have used such lockups to prevent a flood of client exits, according to Reuters.

"We took the harder road, but it was the high road and definitely the right road to stand by our investors to preserve the value of their investments," a company spokesman was quoted as saying.

Many hedge funds in the $2 trillion industry are facing redemption notices, which force managers to sell securities, even ones that may be profitable, to raise cash. A handful of fund managers have tried to avoid the problem and hold onto clients money by imposing the type of measures manager Ritchie has adopted.

This is not the first time Illinois-based Ritchie Capital has imposed new terms to lock in clients.

After the fund firm had lost roughly $100 million of the $3 billion it had under management when Hurricane Katrina struck, executives added a redemption gate that prevented investors from collectively withdrawing more than 10 per cent of the fund's net asset value in any quarter.

Hedge fund firms and their administrators can employ different contracts to ensure clients do not suddenly pull money out, which could prove fatal to a fund that invests in long-term, relatively illiquid strategies. Some can insist on lockups lasting for several years, or require that clients give a fund at least 90 days advance notice that they want to liquidate their investments, for example.