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High-yield hedge fund stops redemptions in fund: WSJ

Hedge fund Stone Lion suspended redemptions in its oldest fund Friday, the latest pain in the high-yield debt market, The Wall Street Journal reported.

The firm said its $400 million portfolio fund received "substantial redemption requests," according to the paper. Stone Lion says it manages around $1.3 billion, and focuses on distressed debt.

Stone Lion's move follows steps taken by Third Avenue Management, which on Thursday said it would stop withdrawals from a high-yield bond fund that it is attempting to liquidate. The value of many distressed and risky investments has plummeted recently.

Risks in the junk bond market caught the attention of widely followed investors Jeffrey Gundlach and Carl Icahn on Friday, ahead of the Federal Reserve's decision on whether to raise interest rates next week. Gundlach — who runs Doubleline Capital — told Reuters that the Fed should keep an eye on volatile credit markets.

He highlighted the SPDR Barclays High Yield Bond ETF, which fell 2 percent Friday and has slid nearly 13 percent this year.

Icahn, an activist investor, also renewed his repeated criticism of the high-yield market, calling it a "keg of dynamite that sooner or later will blow up." He contended that some junk bond funds lack necessary liquidity and investors need to know more about their risks.

Stone Lion did not immediately respond to CNBC's request for comment.

Read the full Wall Street Journal report here.