(Bloomberg News) Billionaire Carl Icahn will return all the money managed for outside investors in his hedge funds, ending a six-year experiment in which he sought to use their cash to gain influence over companies he targeted for change.

Icahn, who buys stakes in companies he considers to be underperforming and then pushes for change, cited concerns about the economy and unrest in the Middle East, according to a client letter filed today with the U.S. Securities and Exchange Commission. Investors had already withdrawn much of their capital from Icahn's hedge funds, leaving just $1.76 billion of fee paying assets in the $7 billion funds.

"While we are not forecasting renewed market dislocation, this possibility cannot be dismissed," Icahn said in the letter. "Given the rapid market run-up over the past two years and our ongoing concerns about the economic outlook, and recent political tensions in the Middle East, I do not wish to be responsible to limited partners through another possible market crisis."

The Standard & Poor's 500 Index has declined 1.5% in the past three weeks as unrest in the Middle East pushed oil prices higher and fueled concerns the economic recovery may slow. Icahn, who has made activist investments at companies such as Mentor Graphics Corp. and Lions Gate Entertainment Corp., said he doesn't plan to sell any securities, using cash on hand and existing lines of credits to finance the return of capital.


His funds produced annual returns of 11% before expenses from inception in November 2004 through the end of last year, according to a separate filing today with the SEC. The S&P 500 returned 3.9% in the period. Icahn's funds lost 36% in 2008, the worst year on record for hedge funds.

"While it may sound 'corny' to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses," Icahn said in the letter.

Icahn said one reason for the withdrawals was that he didn't block redemptions during the 2008 crisis, when most investors sought liquidity.

The funds earned gross returns of about 8.7% during the first two months of this year, according to the investor letter. Icahn didn't return a telephone message seeking comment.

Starting in April, outside investors in the funds will receive cash based on the value of investments as of March 31, according to the letter.