NEW YORK (HedgeWorld.com)?Alliance Capital Management LP, a fund manager with US$475 billion in assets and a subsidiary of globe-straddling AXA Financial Inc., suspended two employees on the basis of preliminary results from an internal investigation into late trading and market timing of mutual fund shares.
The company indicated that it has been contacted by the office of New York State Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission, which are investigating these practices, and is cooperating with them. An internal inquiry ?has identified conflicts of interest in connection with certain market-timing transactions,? it announced in a statement.
As a result, Alliance suspended a portfolio manager of the US$3.2 billion AllianceBernstein Technology Fund and an executive involved with selling Alliance Capital hedge funds. Alliance didn’t identify the two executives, but the Wall Street Journal and the New York Times reported them to be Charles Schaffran, who oversees marketing for Alliance’s hedge fund division, and Gerald Malone, portfolio manager of the Alliance Bernstein Technology Fund.
Alliance has a dozen or more hedge funds, U.S. and offshore, that collectively manage several billion dollars of assets in various strategies. These are, in the main, internally managed funds that draw talent from other parts of Alliance, including analysts and managers from the much larger mutual fund group. While the hedge fund unit has its own sales people, it also uses mutual fund distribution channels.
The fast-widening investigation into improper trading of mutual fund shares was first made public earlier this month when Mr. Spitzer announced a US$40 million settlement with Edward Stern?s Canary Capital Partners, a hedge fund that specialized in trading mutual fund shares .
This inquiry has touched many mutual fund companies, brokerages and banks, starting with Bank of America Corp.?s dealings with Canary. A number of hedge funds also have been asked to provide information on such trades by the Attorney General?s office and the SEC.