Joseph A. Meyer, founder of Arjun LP and Statim Holdings Inc., has an interesting hedge fund business model. He offers an extraordinary guarantee, a Bloomberg piece points out: Invest with Arjun and you will never lose money. His Linkedin page boasts of award winning performance, but regulatory inquiries and inconsistent reporting have begun to raise questions. Just don’t take money out, as the ten-year lock-up has a significant penalty for early withdrawal.
Black-box method that is guaranteed to deliver performance, but just don’t ask for your money back
Meyer, 49, is coy about the workings of his hedge fund. He developed the systematic method by using spreadsheets and can now guarantee performance of the black-box system. Through self-reported performance, the hedge fund has ranked near the top for performance by several hedge fund databases, which do not audit performance and rely mostly on the accuracy of the fund manager.
“All it does is look at the last trade and calculate trades that would be equivalent of, ‘What if this security increases 50 percent in value in the next three seconds,”’ Meyer told Bloomberg when describing the program.
It’s not just the strategy that is unclear. What is additionally unknown about the fund is the assets under management. Meyer told BarclayHedge he had $115 million under management while Bloomberg touted a $338 million number.
The state of Georgia disagreed with both. They said Arjun managed only $39 million, Bloomberg’s Simone Foxman and Margaret Newkirk discovered. The Securities and Exchange Commission, which requires funds over $100 million under management to meet certain reporting standards, had not received a filing from Arjun.
In an April interview with Bloomberg, Meyer claimed Bloomberg’s $338 million figure was correct. But when confronted this month about discrepancies, Meyer said the company doesn’t provide figures on the firm’s asset management “to anyone.” This might be difficult to square up with regulators, who require hedge funds to provide investors proof their assets are not being misused. They are required to either contract an outside firm to conduct a surprise audit or hire an independent accountant to provide investors audited financial statements. Statim does neither, Bloomberg reported.
Regulator finds “multiple irregularities,” begins investigation
But the oddities don’t stop there. Georgia’s secretary of state said its securities division has uncovered “multiple irregularities” with Arjun and Statim Holdings prominently mentioned.
“Based on these irregularities, the division’s enforcement personnel immediately launched a formal investigation into potential violations of the Georgia Securities Act,” Brian Kemp, Georgia’s Secretary of State, said in a statement to Bloomberg on July 11. “The investigation is ongoing at this time.”
Meyer’s legal counsel, Parth Munshi, claimed it is all a misunderstanding, in particular because Statim believed it wasn’t required to submit to a surprise audit. He says Statim has now retained a firm to conduct such an audit.
BarclayHedge, meanwhile, has since discontinued listing the fund. Investors concerned about their investment might also do well to consider the early withdrawal fee Meyer imposes: He takes 50% of the principle of the investment for anyone who takes funds out before the ten-year lock-up period has ended.
The red flags are glaring – caveat emptor