Chicago-based hedge fund Citadel Investment Group has had the credit outlook for two of its funds lowered by Standard & Poor's at a time when insufficient returns are taking their toll on the amount alternative managers are receiving in performance fees, traditionally their biggest source of earnings

The outlook for Citadel's Kensington Global Strategies Fund and its Wellington Fund have been lowered from "stable" to "negative" by S&P, which cited a "heightened risk of significant redemptions, challenging performance prospects due to highly volatile capital markets and a very difficult funding environment".