Tiger Asia, a spinoff of Tiger Management, the hedge fund founded by Julian Robertson, told investors in a letter that the fund would be returning their money in the coming weeks as a result of a “prolonged legal situation.”
That situation is a three-year insider trading investigation by the Hong Kong authorities into allegations of trading improprieties at the hedge fund, which was founded by Bill Hwang. The Securities and Exchange Commission has also been investigating the fund.
“As you are aware, the firm has been the subject of government investigations of alleged trading based upon confidential information and engaging in certain manipulative trades in late 2008/early 2009 in Asian markets,” Mr. Hwang wrote in his letter to investors. “We continue to work to resolve these matters in the U.S. and overseas and look forward to putting them behind us.”
Mr. Hwang is the latest investor to throw in the towel as a hedge fund manager because of a government investigation. His fund has dwindled to about $1.2 billion from about $3 billion in 2010. Though he has not been formally charged with any wrongdoing in the United States, Mr. Hwang has decided to no longer manage outside capital.
He is not the first hedge fund manager to make that decision. David Ganek decided to shutter Level Global Investors, which was raided by the Federal Bureau of Investigation in late 2010. Mr. Ganek said at the time that with the government scrutiny, he did not feel he could comfortably make investment decisions for the long term. Later, Mr. Ganek’s co-founder, Anthony Chiasson, was charged with insider trading.
Mr. Hwang held on to his operation for several years, despite the allegations made by the Securities and Futures Commission of Hong Kong. Regulators there have accused Mr. Hwang of obtaining inside information during 2008 and 2009 about placements of shares in the China Construction Bank Corporation and Bank of China, tips that regulators say earned him $5 million.
The regulator sought to bar Tiger Asia from trading on Hong Kong exchanges altogether, the first time it had ever tried to exclude an entity from trading on its exchanges. That litigation is still pending.
The investigation spread to the S.E.C., which subpoenaed the fund in 2010. While Mr. Hwang has denied the allegations, those claims did little to quell investors or end the investigation.
Mr. Hwang founded Tiger Asia, which is based in New York, in 2001 after working for Mr. Robertson at Tiger Management. He focused his trading on Asia, and like his mentor typically bought and sold stocks.
“I am saddened by the news but certainly understand Bill’s decision,” said Mr. Robertson in a statement. “I have worked side-by-side with Bill for 20 years. I have enormous respect for him as an individual and an investor. He has always been a great partner, a great person and a great friend. I continue to hold him in the highest regard.”
Since its inception, the firm has returned about 16 percent a year for its investors, handily beating the indexes during the same period. In the letter, Mr. Hwang said Tiger Asia would continue as a family office with most employees remaining at the firm.
“It is my hope that someday I will again have the privilege to manage your capital,” he wrote in the letter.
Article source: http://dealbook.nytimes.com/2012/08/14/amid-insider-trading-inquiry-tiger-asia-calls-it-quits/?partner=rss&emc=rss
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