Peloton Partners LLP, a London-based hedge fund that formerly held nearly $3 billion in assets, is liquidating its two funds and shutting down, the firm told investors on Wednesday, according to two people familiar with the situation.

Peloton last week told investors that it was liquidating its $2 billion ABS Fund after lender banks pulled back on credit. It held out hopes that it could salvage its second fund, the $1.6 billion Multi-Strategy Fund, even though some 40 percent of that fund's assets were invested in the ABS Fund.

Today, however, the fund told investors that the Multi-Strategy Fund is being liquidated in coming days, with the proceeds returned to investors, the source said.

It is unclear at this point what proceeds, if any, investors will get from the liquidation of the two funds, the company told investors.