Ex-SAC Manager’s Firm Taking It On Chin

The firm of a former high-flying manager at SAC Capital Advisers is finding itself down in the dumps as one of its funds has lost about 60% of its value and the firm itself reportedly is under investigation on two continents.

The firm of a former high-flying manager at SAC Capital Advisers is finding itself down in the dumps as one of its funds has lost about 60% of its value and the firm itself reportedly is under investigation on two continents. At the center of the matter is Aeneas Capital Management, founded six years ago by Thomas Grossman, who ran an international equities fund at SAC that returned between 29% and 59% after fees between 1997 and 1999. According to Bloomberg News, Grossman’s venture hasn’t done quite as well - in its best year it returned 22%; its worst, -16% -- and now, the Securities and Exchange Commission wants to determine whether Aeneas violated securities laws by improperly shifting assets or liabilities among its accounts. At the same time, Bloomberg reports the Bursa Malaysia, the SEC’s counterpart in that country, is looking into whether a firm manipulated share prices that caused stock prices to soar, only to dive by the high double digits - one sinking 83%. BM doesn’t name the firm, but sources familiar with the situation identify it as Aeneas. It will be a while before the matter shakes out, but observers say the current hedge fund matter demonstrates the risks of firms that are allowed to make big bets in companies but are not required to disclose them to regulators. Citing data from Hedge Fund Research, Bloomberg News notes that more than 500 hedge funds have closed in the past two years, but collectively they have not had the impact of one Long-Term Capital Management eight years ago. Attorney Kenneth Breen of the law firm Fulbright & Jaworski, who represents Aeneas, told Bloomberg News that the firm is “cooperating fully with securities regulators.”