The secret to hedge fund star and “Tiger cub” Nehal Chopra may now be revealed. According to a Securities and Exchange Commission filing, when Chopra was delivering her best returns also correlated with a period of time when she was receiving “confidential information and advice” from her husband, Paritosh Gupta. The help Chopra had involved the production of investor letters, marketing materials and potentially some overlapping investments, the December 5 SEC administrative proceeding indicated.

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Star hedge fund manager gets "advice"

It was in July 2015 when a Forbes headline stated: Nehal Chopra Runs Circles Around The Boys With Top Performing Hedge Fund. Chopra’s Tiger Ratan hedge fund had delivered 46.8% returns in 2013 and 22.3% in 2014. The fund was up 28.4% in the first half of 2015 when the article was written.

But the SEC document notes that her positions “reflected substantial overlap” with that of Ratan Capital Management, where her husband worked. “Ratan and Chopra failed to disclose to Ratan’s investors and prospective investors the significant role that Gupta played in Ratan’s investment process and operations,” the SEC document revealed, calling subsequent investor communications “misleading.”

“Gupta provided advice and support to Chopra as she launched Ratan, including advice on investing and how to build her network in the investment community,” the SEC complaint stated, claiming that Gupta shared confidential information with Chopra from his then employer, who was not named in the document but is believed to then be Brahman Capital.

The SEC complaint notes significant sharing between Gupta and Chopra:

Adviser A had a position in the same security at that time, and also purchased more shares that day. Similarly, in November 2011, Gupta emailed Chopra, telling her that she should start selling a particular security. That day, Ratan began selling its position in the security. Adviser A traded in the same securities and derivatives of those securities on the same day, reducing its long position in the security. In addition, on at least one occasion, Gupta monitored Ratan’s entire portfolio while Chopra was out of the country. Gupta also provided Chopra with direct access to certain of Adviser A’s web-based third-party research providers, which provided her access to market intelligence, data and analytics, without Adviser A’s knowledge. Likewise, Gupta forwarded to Chopra emails and electronic messages that contained fund-paid third-party research, including investment analyses, models, and news on issuers, such as those issuers’ recent stock sales.

From March 2013 to June 2013, Gupta also provided services to Ratan as a consultant with the duties of an investment analyst, which included making investment recommendations. Gupta provided analysis and investment recommendations to Ratan and Adviser A on the same securities during this time period. Gupta’s simultaneous work for both Adviser A and Ratan was never disclosed to Adviser A, Adviser A’s clients or prospective clients or Ratan’s investors or prospective investors in Ratan’s pooled investment vehicles.

Performance sags with Valeant

After the 2015 headlines, Chopra started to experience performance problems, as her highly concentrated portfolio of seven to nine positions started to falter. Hedge fund hotel stocks such as Valeant took their toll on performance. She lost $300 million and posted a 33% decline in three months in 2015.

Julian Robertson, who initially seeded the hedge fund, pulled his investment this April, compounding the problems. Prior to that, Robertson had appeared on Bloomberg TV with Chopra on a segment discussing SAC Capital and insider trading (also embedded below). In the SEC filing, Ratan – which had eliminated the “Tiger” name from the hedge fund name – the fund reported $375 million in regulatory capital, which includes leverage and derivatives.

The SEC administrative filing requires Gupta to pay a $250,000 fine and Chopra and her hedge fund Ratan to each pay a $200,000 fine.

 

SEC order here

H/T ZeroHedge