Citadel Investment Group is winding down its $1bn fund of hedge funds and redeploying the capital to support new hedge funds.

The move suggests Citadel is positioning itself to back managers who have quit the business or been forced to shut their funds in recent weeks as they launch new funds in the coming months.

The $1bn Fusion fund of hedge funds, which assets come to 95 per cent from Citadel, invests in more than 50 hedge funds.

That capital will be put into the two other areas that make up the Citadel Alternative Asset Management unit of Citadel. The remainder will be returned to outside investors.

The two areas are named Pioneer, an incubation unit that provides infrastructure support to emerging hedge fund managers, and Discovery, a seeding unit providing capital to standalone managers who have their own infrastructure.