Oct. 30--(Dow Jones) Citadel Investment Group is allowing its investors to withdraw their money from the $14 billion Chicago hedge-fund firm, 10 months after it put up "gates" that prevented investor withdrawals, according a letter sent to investors Thursday.

The move to return cash comes on the heels of a sharp rebound in the performance of Citadel's flagship hedge funds after a difficult 2008 when the firm halted investor withdrawals.

Citadel's two big funds, Wellington LLC and Kensington Global Strategies, are up about 57 percent, the investor letter said.

Earlier this month, Citadel's investors were allowed to take $250 million in total, on a pro rata basis among investors. Now, the hedge fund's "gates" are coming down completely.

Citadel was one of many hedge-fund firms that put in place gates in the depths of the financial crisis last fall. Since then, markets rose and Citadel, like some other funds, still hadn't allowed investors to pull their money out. Several other hedge fund firms lifted those gates more quickly.

In the letter, the firm said management and investment-team efforts have allowed Citadel to "reshape our portfolio, restructure our balance sheet and restore our liquidity position."

"Our performance year-to-date reflects more than just a "rebound" in the value of our portfolio holdings," Kenneth Griffin, the head of Citadel Investment Group, said in his letter to investors.

In the letter, Griffin signaled Citadel might be willing again to buy distressed assets, as it did with the fire-sales of the portfolios of troubled hedge funds like Amaranth Advisors LLC and Sowood Capital several years ago, when Citadel was doing well.

But Griffin expressed reluctance to embrace some risky transactions.

Griffin said Citadel likely wouldn't undertake an investment similar to the one it made in online brokerage firm E-Trade Financial Corp. Though the deal has "proven to be quite profitable for the funds," he said, it represented a "significant concentration of risk."

Instead, Citadel will focus on investments that it can more easily exit from, and have a more diversified portfolio, Griffin told his investors.

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