Norshield Financial Group said Wednesday is suspending redemptions on its core hedge fund product, freezing an estimated US$300 million in investor funds.

In what was described as an extraordinary move, the Montreal-based wealth asset manager said demands from investors to get their money back have led to a crisis in liquidity.

Accordng to reports, investors have asked for their money back because weak market conditions have hurt the performance of the firm’s funds, and because of allegations of Norshield’s involvement in a legal dispute with animation house Cinar Corp. that have re-emerged in the press.

Investors who have tried to pull an estimated $100 million out of the company’s $300-million Olympus Univest Ltd. fund have had their redemptions put on hold. The suspension of redemptions from the fund of hedge funds affects the many funds in the Olympus family, a series of alternative strategy mutual funds and structured notes.

Norshield manages about $500 million in investments.

The liquidity crisis is another blow to the struggling hedge fund industry. Hedge fund manager Portus Alternative Asset Management Inc. was put into receivership in March following investigations by securities regulators from across Canada.

Norshield says it will need 60 to 90 days to fulfill redemption requests. It adds that it is seeking input from a series of external advisors and plans to report back to investors in two weeks.