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Portfolio > Mutual Funds

Spitzer Widens Investigation of Hedge Fund Late Tr

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NEW YORK (– New York attorney general Eliot Spitzer’s office subpoenaed around a dozen additional hedge funds in the ongoing inquiry into the trading of mutual fund stocks.

Tewksbury Capital Management is among the firms required to provide information on after-hours and short-term trading of mutual fund shares–a special privilege allowed by mutual fund companies under quid pro quo arrangements that harmed long-term shareholders, according to the attorney general. Monroe Trout sold multi-billion dollar Tewksbury, formerly Trout Trading Management Co. Ltd., to chief executive Matthew Tewksbury last year.

Haidar Capital management, Goodwin Trading Corp., and Samaritan Asset Management also received subpoenas. None of these managers have been accused publicly of any wrongdoing. The attorney general’s office said that all information about the subpoenas is confidential at this time.

Said Haidar runs a long/short equity strategy that might have included mutual fund shares. One of his funds, Haidar Jupiter, has US$170 million in assets and returned more than 24% (annualized) since inception. Samaritan funds, managed by Edward Owens, contain around US$143 million in assets. Their five-year annualized returns range from 21% to 28%.

Mutual fund companies caught in the probe include Bank of America, Invesco Funds Group, Janus Capital Corp. and Vanguard Group. At least one, Janus, said that it plans to reimburse shareholders who lost money from improper market timing trades.

The Securities and Exchange Commission and the U.S. attorney in Manhattan, James Comey, reportedly are planning their own investigations into the trading of mutual fund stocks.

Millennium Management has been subpoenaed, as well. Last week Mr. Spitzer announced a US$40 million settlement with Canary Capital Partners, a hedge fund that specialized in trading mutual fund shares. Canary manager Edward Stern and his staff are providing evidence in the probe Previous HedgeWorld Story.

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