BOSTON/NEW YORK - Millennium Management returned about $3 billion to investors in early October after the hedge fund firm changed some rules, making it easier for clients to exit, people familiar with the fund said.

The New York-based hedge fund firm, run by Israel Englander, spent months working on ways to offer clients quicker access to their money at a time hedge fund industry investors are demanding greater transparency.

Millennium has gotten high marks from industry analysts for the way it coped through what could have become a crisis for the firm.

At the end of the third quarter, the firm offered clients new choices. Now investors can get up to 25 percent of their money out on a quarterly basis or remove it all at once on an annual basis, said people familiar with the fund who were not allowed speak about it publicly.

A spokesman for Millennium declined to comment.

By early October, Millennium had sent back about $3 billion, leaving the firm with roughly $8 billion in assets.

The redemptions came less than a year after investors reacted with anger when dozens of small and large hedge funds restricted clients' exits by putting up so-called gates.

These barriers are used only on rare occasions and often signal trouble at a fund. But last year many firms used them to prevent managers from having to sell illiquid assets at fire-sale prices, industry lawyers and managers have said.

At Millennium, no gates were put up during the financial crisis. But certain provisions still restricted investors from getting all their money out at once.

Earlier this year, Fitch Ratings, which had issued a provisional investment grade rating on Millennium in the event it ever sold bonds to raise capital, said the fund was well positioned to handle demands for cash because it operated with low leverage and had ample cash in reserve.

Millennium, which focuses on trading securities, delivered gains of more than 15 percent during the first 11 months of the year, modestly less than the average fund's 19 percent gain.

This year's average gains have put the industry on track to deliver its best returns in a decade and have slowly wooed institutional investors back into alternative assets.

Investors added $150 billion in new money to hedge funds during the first nine months of 2009, helping push industry assets across the psychologically critical $2 trillion mark in November for the first time since the financial crisis.

The news about Millennium comes as normally secretive fund managers try to regain investors' trust and their money by spending more time with would-be clients and telling them more about how they make money.

Englander, who was ranked among the 400 wealthiest investors by Forbes two months ago, has graced a magazine cover and spoken at industry meetings. People familiar with Millennium say Englander's move to increase his public profile may have been part of an effort to attract money from several sovereign wealth funds and European investors.

In the past, Englander's fund has had to weather other storms -- some of its own making.

In 2005, the fund paid $125 million in fines and restitution to securities regulators to settle charges arising from a mutual fund market-timing probe. Regulators found that Millennium had engaged in abusive trading strategies that cut into the returns of ordinary mutual fund investors.

While Englander, known to investors and friends as Izzy, may not be as well-known as other more prominent hedge fund managers, he has a long and storied history on Wall Street.

He was the onetime partner of Boesky-era trading legend John Mulheren. The two men founded Jamie Securities Company in 1984. The firm closed a few years later when Mulheren was convicted of insider trading in 1990. A federal appellate court overturned Mulheren's conviction in 1991.

But by then, the men had gone their separate ways -- with Englander, who was never implicated in the scandal involving Mulheren, launching Millennium in 1990.

(Reporting by Svea Herbst-Bayliss and Matthew Goldstein. Editing by Robert MacMillan)

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