The Securities and Exchange Commission is investigating whether of not Michael Platt’s BlueCrest Capital Management’s employee fund represents a conflict of interest for the once giant hedge fund firm.
BlueCrest still big, just smaller
The probe began last year and was launched by one of the agency’s enforcement divisions focusing on whether there exist any conflicts with BlueCrest’s management of a fund that manages Platt’s and his employees’ money. No wrongdoing has been alleged by the SEC and seems to simply be following its policy of looking at potential conflicts involving asset managers.
In a speech last October, SEC charwoman Mary Jo White spoke to instances where hedge funds were making profitable trades without clients necessarily seeing the gains. Without mentioning any specific firms she affirmed that the agency would continue to look at hedge funds’ trading of “proprietary funds rather than client accounts in contravention of existing policies and procedures.”
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After 13 years in hedge funds, the Channel Islands-based BlueCrest announced in December that they would be returning clients’ money to concentrate of managing the wealth of Mr. Platt and his employees owing to declining fees and profits in the industry as a whole.
That move followed a number of larger investors including numerous pensions plans pulling their money out of the firm’s funds. In 2013, at its peak, BlueCrest had over $37 billion under management, as of December that number had been reduced to somewhere around $8 billion. In addition to the loss of pension funds, the firm separated a computer-driven trading unit from the firm which took away nearly $9 billion from the firm’s money under management.
BlueCrest maintains there is no conflict
Both a spokesman for BlueCrest, Ed Orlebar, and Judy Burns, an SEC spokeswoman, declined to comment on the probe of a potential conflict.
BlueCrest Chief Financial Officer Andrew Dodd defended the proprietary fund in 2014 saying that the fund has existed for years in order to retain and reward the fund’s star performers and the company was adequately informing its investors of its trading with their money over all hedge fund properties.
Employee-only funds “may produce investment results that are substantially different from those of our clients,” BlueCrest said in a January 2015 regulatory filing. That acknowledgment goes a long ways defend the firms compliance with transparency issues.