Dec. 13 (Bloomberg) -- Ritchie Capital Management Ltd., struggling with two years of below-average returns, plans to sell assets of its flagship hedge fund and return cash to investors, according to an e-mail sent yesterday to clients. Ritchie Capital is negotiating with an undisclosed buyer for the assets of the Multistrategy Global Fund, the e-mail said. Ritchie Capital, based in Geneva, Illinois, oversees about $2.8 billion including borrowed money. The decision reverses a plan approved in October by founder Thane Ritchie and investors to refund 80 percent of clients' money over the next 2 1/2 years and keep the fund open for at least three years. The fund, which invests in everything from bonds to energy, lost more than 2 percent through August from the start of 2005. That compared with an average gain of 14 percent for competing funds, according to data compiled by Hedge Fund Research Inc. in Chicago. After consulting with a committee of investors, the fund manager ``decided to terminate the restructuring and effect an orderly disposition of the assets,'' Ritchie said in the e-mail. The sale would not include the mostly private-equity investments that the firm separated into a so-called side pocket last year. Those holdings accounted for about 20 percent of the fund. The deal would be structured so that Ritchie Capital will continue to manage the assets, Doug Rothschild, the firm's chief administrative officer, said in an interview. Rothschild and spokesman Justin Meise declined to provide further details on the sale or the fund. Investors in the Multistrategy fund redeemed about $1 billion from the start of 2005 to October. The fund suffered last year from losing energy bets. Its offshore version was down less than 1 percent this year through August after returning about 12 percent annually since it started in August 1999.