Hedge Fund in RI Portfolio Reports First Ever Loss
Friday, January 09, 2015
Brevan Howard, one of Rhode Island's hedge fund investments harshly critiqued by Forbes' Edward Siedle in 2013, has reported its first annual investment loss since it began 11 years ago,
Siedle, the former Securities and Exchange Commission lawyer, conducted an investigation into then-General Treasurer Gina Raimondo's hedge fund strategy -- and pointed to Brevan Howard's practices on multiple occasions.
The Financial Times reported this week that "since being founded in 2003 by billionaire British trader Alan Howard and four colleagues from Credit Suisse, the company has prided itself on the record of its Master Fund, which had never lost money for clients in any calendar year. However, last year, it recorded a loss of 0.8 per cent, according to people familiar with the fund."
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTEarlier this week, the Wall Street Journal reported that Zurich reinsurer Swiss Re is looking to sell its minority stake in Brevan Howard Asset Management LLP. Rhode Island had nearly $79 million in Brevan Howard as of December 2014.
In the past year, Rhode Island has divested from its hedge fund investments in Third Point Capital, as most recently, Mason Capital -- two firms identified by then-Rolling Stone writer Matt Taibbi, when he wrote "Looting the Pension Funds" in September 2013.
Brevan Howard Previously Blasted by Siedle
In a chapter of his report entitled, "ERSRI Agrees to be Kept in the Dark, Grants Mystery Investors Licenses to Steal and Consents to to Potential Nondisclosure Illegalities," Siedle noted that Brevan Howard stated in its investment materials that "as is common with other hedge funds...it intends to withhold from investors detailed disclosure of the composition of its investment portfolios."
"Even more deplorable, the hedge fund managers blandly state that they are not required to provide the same type or level of disclosure regarding investments and strategies to all investors," wrote Siedle.
According to Siedle's recap of Brevan Howard materials, the hedge fund had stated, "The General Partner may in its absolute discretion agree to provide certain strategic investors in the Partnership with information about the Partnership and its investments which is not available to investors generally" -- and Siedle noted, "In other words, ERSRI has grotesquely consented, for unimaginable reasons to the managers permitting other mystery investors in the hedge funds to profit at its expense."
"That Brevan Howard fund was one I discovered at length in my report, about secret provisions. Now, Swiss Re wants to dump it -- the performance is way off," said Siedle this week.
"As we're finding out about this when now [the General Treasurer] has to disclose the performance of all these funds in February," said Siedle, who said that he will be conducting a second investigation year into Raimondo. "It's clear that this information is now leaking out."
Related Slideshow: RI Public Pension Reform: Wall Street’s License To Steal
See the key findings from Forbes' columnist Edward Siedle, who unveiled his investigative report into the RI pension system, "License to Steal," in October 2013.
"The Employee Retirement System of Rhode Island has secretly agreed to permit hedge fund managers to keep the state pension in the dark regarding how its assets are being invested; to grant mystery hedge fund investors a license to steal, or profit at its expense using inside information; and to engage in potentially illegal nondisclosure practices," said Siedle.
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