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The Morning Brief: SEC Charges Would-Be Hedge Fund Manager With Fraud

The Securities and Exchange Commission has charged a New York man with fraud for claiming to run a hedge fund while stealing money from investors. The regulator said New York-based Moazzam “Mark” Malik raised $840,774 from investors by falsely claiming he was running a hedge fund with $100 million under management. However, the SEC alleged that the fund never made a legitimate investment and never held more than $90,177 in assets. Rather, Malik was using the money as a personal piggybank, spending it on luxury travel, dining, and jewelry, as well as his continuing education courses at Harvard and his subscription to a dating website.

Malik refused repeated redemption requests, and the SEC said he created “a fictitious fund employee who sent one investor an e-mail claiming that Malik had died.”

Malik has several times changed his firm’s name since he created it in 2010, according to the regulator. He initially called it Wall Street Creative Partners, then Seven Sages Capital, then American Bridge Investment Group and most recently, Wolf Hedge. Malik described his fund as “a privately held Global Investment Management firm dedicated to the individuals and institutions around the world,” according to the complaint. He even created a fictitious investor relations person, called “Amanda Ebert,” using a photo of a woman from the Internet, unbeknownst to the real-life woman in the photo.

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Andrew Law’s Caxton Global Investment cut its U.S. equity exposure by nearly 60 percent, to $1.3 billion, at the end of the fourth quarter, from $3 billion in the previous three-month period. At the same time, the macro fund, managed by New York-based Caxton Associates, made a big bet on discount retailers. It established new stakes in Walmart, which now accounts for 9.2 percent of its U.S. equity portfolio, and Target, which now accounts for 4.5 percent of its assets, making the pair its two largest individual stock holdings. Its third largest individual stock holding is Best Buy, even after the firm its stake by about one-third.

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Richard Perry’s New York-based Perry Capital liquidated its large stake in Herbalife, which accounted for nearly 9 percent of its U.S. equity assets. Herbalife is the multi-level marketer of nutrition products that William Ackman’s Pershing Square Capital Management has been famously shorting. Perry also unloaded its entire sizable stake in drug giant Shire. On the other hand, it took a significant new stake in CBS, which now accounts for nearly 4 percent of the hedge fund firm’s assets.

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Boston-based Baupost Group trimmed its U.S. stock portfolio at the end of the year to nearly $5.1 billion, from $5.7 billion the previous quarter. It also boosted its stake in Cheniere Energy, making it the hedge fund firm’s largest stock holding. It was Baupost’s second-largest holding in the previous quarter. Baupost also tripled its stake in Antero Resources, an independent exploration and production company. At the same time, it cut its stake in Micron Technology by more than 60 percent. 

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Alexander Roepers’ Atlantic Investment Management has boosted its stake in Triumph Group to 8.5 percent, buying more than 500,000 shares since the end of January. The activist investor continues to say in a regulatory filing the position in the supplier of aerospace components and systems is “for investment purposes.”

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David Harding’s London-based Winton Capital Management slashed its U.S. equity portfolio by 37 percent, to $8.8 billion, at the end of December, from nearly $14 billion the previous quarter. The computer-driven macro firm had fared better than many of its peers over the past few years, especially in 2013, because it had a larger exposure to equities.

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