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The Morning Brief: Ex-Visium Portfolio Manager Found Guilty

Stefan Lumiere, a former portfolio manager for Visium Asset Management, was found guilty of conspiracy to commit securities and wire fraud, securities fraud, and wire fraud, according to an announcement from federal prosecutors. The government had charged Lumiere with scheming to mis-mark securities in one of the firm’s hedge funds to overstate the value of the fund. A jury reportedly found him guilty after just 90 minutes.

Lumiere faces up to 45 years in prison, although it is doubtful he will be sentenced for nearly that long. He is one of three former Visium portfolio managers criminally charged by the federal government for their roles in several securities violations. Visium portfolio manager Sanjay Valvani was charged with securities fraud and wire fraud connected to an insider trading scheme with Gordon Johnston, a political intelligence consultant and former senior official at the Food and Drug Administration. Valvani was also charged with passing material nonpublic information to Christopher Plaford, a former portfolio manager who was also charged. Lumiere was charged in a separate scheme with Plaford. Plaford pleaded guilty to seven counts, including participating in this scheme as well as another scheme involving another political intelligence consultant. Valvani committed suicide several days after he was charged. Visium, which once managed as much as $8 billion, returned money to clients after the government brought its charges last year.

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Total assets invested in the hedge fund industry rose by $46.8 billion in the fourth quarter, bringing the total to $3.02 trillion, according to data tracker HFR. Altogether, total capital rose by $121 billion last year. All of these gains were the result of performance. Total net redemptions came in at $70.1 billion. As we earlier reported, the HFRI Fund Weighted Composite Index rose 5.5 percent in 2016, the best performance since 2013. “Growth occurred against a backdrop of mixed withdrawals, as investors and institutions positioned for continued geopolitical and economic uncertainty in 2017, including the new policies of the Trump administration, progression toward Brexit implementations and uncertain European elections in Netherlands, France, Germany and Italy,” said Kenneth Heinz, president of HFR, in a press release. “With global equities near record highs and US interest rates beginning to rise, funds tactically positioned for this environment are likely to benefit from these developments and lead industry performance in 2017.”

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SRS Investment Management, which is the largest shareholder of Avis Budget Group with 8.5 million shares or 9.7 percent of the total outstanding, said it has economic exposure to another 13.5 million shares under certain cash-settled equity swaps. The swaps mature between August 21, 2018 and May 18, according to a regulatory filing. The hedge fund firm also said it has economic exposure to an additional 3 million shares under certain option contracts. The swaps and options do not have voting power. New York-based SRS was founded by Tiger Global Management alum Karthik Ramakrishna Sarma.

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