S.E.C. Is Reported to Be Examining a Big Hedge Fund

NYTimes.com ^ | 06/23/2006 | WALT BOGDANICH and GRETCHEN MORGENSON

[devane617]

One of the nation's most prominent hedge funds, Pequot Capital Management, is under investigation by the Securities and Exchange Commission for possible insider trading, according to government officials briefed on the case.

[devane617]

Investors and those interested in WS should read this NYTimes article.

[devane617]

Investor ping

[DH]

"...is under investigation by the Securities and Exchange Commission for possible insider trading."

Gee! Who woulda ever guessed? I'm shocked, simply shocked I tell ya.

[devane617]

Of course the NYT had to drag GW into this

[edpc]

If there's a bustle in your hedgerow hedge fund, don't be alarmed now

[Plymouth Sentinel]

These guys have operated outside the advisory arena since the dawn of time: gleefully misrepresenting the risk and return objectives of their products and services, reporting to clients in a way that is inconsistent with accepted methods, amortizing huge expenses (read non research related) among limited partners, and hosts of other shenanigans.

Most important, many of them have custody of client funds under investment advisor law, though are not subjected to SEC audits.

I say baloney. I own an advisory, and a hedge fund, but am SEC registered. The fiduciary duty I owe my clients is a massive committment. They want the fees, they oughtta get the registration and be subject to the same legal constraints, if for no other reason than to protect clients.

[L,TOWM]

One thing that's constant about the SEC --

They've never met a headline they did'nt love.

(Except for maybe some of those reporting their dropping the ball, moving too slowly on something serious, or just plain screwing up.)

[bobjam]

The SEC is investigating a hedge fund? Why must the Southeastern Conference concern itself with how UGa pays for its hedges?

[L,TOWM]

I ran into a group of hedge funds in 1998 that had a little under $5 BILLION under management. State registered. And since the State was CA, you could darned just call it an "unregulated player".

The loopholes written into NISMIA for some of these guys were, and are, big enough to drive a few big - rigs through.

[Hydroshock]

The rich get richer and the poor, well you know the rest.

[Plymouth Sentinel]

Pretty sick, eh?

[RSmithOpt]

Or better yet, "Sail a nuclear carrier through".

I think the derivatives and hedge fund business is seriously unregulated.

IMHO, I think neither should exist is many respects. With offshore LLC's managing these type funds that 'play' in / on US markets, well that's BS.

[tcostell]

This has nothing to do with regulation of the industry. this is about someone being investigated for breaking a law that already exists.

As soon as the talk turns to hedge funds it seems that FR is loaded with 'class warriors' who want to punish people for doing better than them.

Be careful what you wish for.

[L,TOWM]

I think the derivatives and hedge fund business is seriously unregulated.

It depends on what derivative you're looking at. Garden variety options are actually oversighted pretty well. Foreign currency futures, OTH...
And compared to other outfits in the market, yes, hedge funds are subject to far less regulation than most other non-person market players.

IMHO, I think neither should exist is many respects.

I would respectfully disagree. A lot of big players use derivatives as a form of insurance policy to limit losses. When abused or when some really f's up using them as an investment themselves, that is what hits the media. Fortunately, spectacular derivative flame outs are rare, but get a lot of press. Every day though, banks, momey managers, and investors use derivative products as a risk management tool.
The hedge funds themselves are creatures of regulation, and like any other market player, they can be positive, negative, or part of the scenery. With a few changes to SEC Rule 501(d), hedge funds would either be regulated like Mutual Funds, or look different than what they look like now.

With offshore LLC's managing these type funds that 'play' in / on US markets, well that's BS.

Restricting offshore access to US capital markets would be quite painful for many US citizens. It is also not a hallmark of capitalism to exclude marketplace participation by anyone.

[RSmithOpt]

I understand why the investigation has been initiated.

I am not jealous of people doing well in the stock market. I've done well myself. However, with 1.2 trillion dollars invested domestically in hedge funds versus 9.2 trillion in general for the stock markets, they carry a large impact on market swings as for automatic computer generated / analyzed buys and sells based on sector movements (stock movements) that has nothing to do with overall value of companies and company profits. Hedge fund companies continuously analyze vast data bases to determine when to sell short, initiate or purchase derivatives, etc.

Kinda takes away incentive for investing in companies that show good promise of return when hedge funds can 'wipe out' a stock's value because the fund is doing nothing but 'playing the numbers'. Basically the database analysis looks at return amounts versus investment amounts versus timing for stock/sector/commodity movement. I honestly believe the current price of a barrel of oil and gold is directly related to these types of funds being allowed to operate as to speculation / analysis and insider information with such billions manipulating market price.

So, why exactly was Mr. Aguirre fired for doing a good job? Guess he was getting too close to exposing exactly how the shell game is really working? Primarily go long, time a secondary short, use some leveraged borrowing, sprinkling with some derivatives like interest rate or currency exchange swaps and then manipulate to negate 90% of the swings in the market for wealthy investors with $250K or more to buy shares into the fund.

Lastly, with such funds operating as allowed, the only law of supply and demand that remains is one for cash as demand for commodities can easily be manipulated by price fluctuations from market speculation of hedge fund investors. The average consumer is screwed.

[Element187]

hit me with the add

[devane617]

Done.

[Bratch]

The SEC is investigating a hedge slush fund? Why must the Southeastern Conference concern itself with how UGa UT pays for its hedges players?

Edited in the interests of accuracy.

[Diddle E. Squat]

Uh oh!

Also nervous:

[tcostell]

You know... I try very hard to keep it polite on these posts but I have to tell you, that's one of the biggest piles of steaming fertilizer I've ever read. You don't have the foggiest idea what hedge funds do ... in fact ... hedge funds do a wide variety of things incorporating many different kinds of strategies. And none of them take anything away from the decision making of others. There is nothing I do that reduces the 'incentive' of other people to invest the way they see fit.

You toss around "insider trading" and "market manipulation" as if these are the standard practices of the entire hedge fund industry and nothing could be further from the truth. Evidence of this is apparent from this story where someone is being investigated for that very thing. If it was a common practice in the industry it wouldn't even be newsworthy.

The area that you've tried to highlight is one in which I've personally worked for 17 years, am regarded as an industry expert, and am currently working in one of the largest hedge funds in the world... designing, building and managing quantitative investment strategies. You seem to think it should be regulated more stringently, but I don't do anything that a million other people don't do. I analyze public information, make trading decisions and live with the results of them. I break no laws, I haven't misrepresented a thing, I don't use any private information, and I don't manipulate markets.

You seem to feel that there should be some new regulation for the industry that requires people to only make investment decisions the way that you do. That is patently idiotic. And the rest of your post is just unsubstantiated nonsense.

You type well, but the fact is, the substance of your post is little more than fodder for the tinfoil hat crowd. You could replace 'Hedge Funds' with 'Jewish Banking conspiracy' and it will make just as little sense as it does now.

I don't mind that you don't know what you're talking about, but since you don't I'd appreciate it if you would simply shut your pie hole and quit labeling me and my co-workers without so much as a shred of evidence or even reasoned innuendo.

To someone like me who is not only better informed but is in fact part of the group that you unfairly characterize, your statements make you look like a buffoon.