In a move that could force similar changes at other loss-making hedge funds, the well-known fund manager William Ackman is cutting his fees and allowing investors to take what is left of their money from one of the funds he manages, according to media reports.

Mr Ackman, who runs Pershing Square Capital Management, is suffering huge losses on a fund he started nearly two years ago to bet solely on the rise of the stock of the discount retailer Target Corporation.

His actions come at a time when hedge funds, which typically charge investors an annual management fee of 2 per cent and a performance haircut of 20 per cent, have suffered poor returns and imposed limits on client redemptions to stem a mass outflow of client funds. Last year, hedge funds on average lost more than 19 per cent, the worst performance on record.

The fund, called Pershing Square IV, is down nearly 90 per cent this year, and Mr Ackman has been feeling pressure from investors who want to take their money out. In an effort to mollify those investors, Mr Ackman apologised for the losses in a letter sent on Sunday. He personally committed $25 million to the fund to help pay investors.

"Bottom line, PSIV has been one of the greatest disappointments of my career to date," Mr Ackman said in the letter. "That said, we continue to believe that we will ultimately be successful in our investment in Target."

Those who want to withdraw what is left of their capital from the fund will be paid in March, Mr Ackman said. About 90 per cent of the investors in the Target fund are also investors in Pershing's other hedge funds, which were down 11 per cent to 13 per cent at the end of last year.

For those investors, Mr Ackman has agreed to forgo any performance fees on the other funds until he makes up for the current losses in the Target fund, according to the letter. The concessions could spur other hedge fund managers to cut their fees and increase the amount that investors can withdraw. Hedge funds typically charge customers yearly fees of 2 per cent of total assets managed plus 20 per cent of any profits.

Several large hedge funds, including Citadel Investment Group and Farallon Capital Management, have halted investor redemptions in certain funds after having huge losses last year.