Former SAC Capital Advisors portfolio manager Mathew Martoma is accusing the government of using “vague” details to embellish its case against him, according to a Reuters report. Martoma claims in court papers filed Monday evening that the government alleges that he made illegal trades over a seven-day period in July 2008. Yet he accuses prosecutors of loosely tying these trades to an alleged conspiracy described “in vague terms” and “stretching back in time to late 2006" that gave him “an edge.” Martoma also said in the papers he is seeking more information about the case against him. Martoma’s filing comes at a time when SAC founder Steve Cohen has become more defiant in his dealings with the government as he tries to fend off more investor redemptions.
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There’s more consolidation happening in the hedge fund of funds business. Chapel Hill, North Carolina-based investment firm Morgan Creek Capital Management agreed to acquire the $700 million alternative funds business of Signet Capital Management. Signet, which has offices in London, Hong Kong, Lausanne, Switzerland and Washington, D.C., is known for its fixed income offerings to European institutional investors. It was founded by Robert Marquardt in 1993. The current senior management team at Signet will join Morgan Creek, founded in July 2004 by Mark W. Yusko, former chief investment officer of The University of North Carolina at Chapel Hill.
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The Dow Jones Credit Suisse Hedge Fund Index posted a 1.39 percent gain in April, as nine of ten strategies finished the month in the black. Dow Jones also figures the industry took in about $3.36 billion of net new money in April, bringing total industry-wide assets under management to about $1.85 trillion. The equity market neutral and fixed income arbitrage strategies attracted the most capital on a percentage basis.
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More investors cashed out of their hedge fund investments in the past month. The SS&C GlobeOp Forward Redemption Indicator measured 3.77 percent in May, up from 2.95 percent the previous month. The forward redemptions measurement — based on activity of SS&C GlobeOp fund administration clients — has trended down significantly since reaching a high of 19.27 percent in November 2008.
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Herbalife surged another 2.74 percent on Tuesday, closing at $50.56 amid what is clearly a short squeeze and capitulation among investors who are negative on the multi-level marketing company, which sells nutrition supplements and other products. Pershing Square Capital Management founder William Ackman still thinks, or at least hopes, that the Federal Trade Commission will launch an investigation of the company’s selling practices and deem Herbalife a Ponzi scheme. His optimism received a little boost of late. On Tuesday, a public relations group that calls itself the Global Strategy Group distributed a letter fired off Friday by the Hispanic Federation calling on the FTC to investigate Herbalife. The group asserts that immigrants, especially undocumented individuals, are disproportionately enticed by the company’s promise of becoming rich from just a few hours of work. “A particular concern…is whether distributors make money selling products or recruiting others to sell products,” it states. “The latter is an indicator of a pyramid scheme.” Hmm. Now that assertion sounds familiar.
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Alan Howard’s BH Macro Fund has already posted a 3.45 percent gain this month, through May 17, bringing its gains for the year to 10.78 percent. In April, when the fund rose 3.25 percent, the London hedge-fund firm said in a monthly report that the fund generated gains across all main asset classes, driven by gains in macro equity trading and in European interest rates trading. It also enjoyed smaller gains in credit trading. The fund did suffer small losses in interest rates volatility trading and in U.S. interest rates trading.
