Highbridge Capital Management's former top man in Asia's plans to launch a US$1 billion hedge fund have been stymied for the time being by an anonymous complaint.
Carl Huttenlocher's Myriad Asset Management was expected to debut on Sept. 1. But Hong Kong's Securities and Futures Commission has postponed awarding the new firm its license pending an investigation of the allegations that Huttenlocher's fund at Highbridge improperly valued assets or that the fund's redemption gate and eventual payout plan were designed to inflate fees at the expense of clients.
The SFC received the complaint earlier this summer and issued requests for information from both Huttenlocher and Highbridge last week, The Wall Street Journal reports. The probe is focused on specific convertible bond holdings and how Highbridge valued those assets at specific times; the regulator has asked for, among other things, copies of the fund's communications with investors and its valuation policies.
Both Huttenlocher and JPMorgan Chase, which owns Highbridge, denied any wrongdoing.
"In the three years I met with investors since 2008, I didn't hear any complaints about the Asia Fund's valuation or gating practices, and in fact, most investors applauded the plan," Huttenlocher said. "There is no factual basis to this anonymous complaint."
Highbridge shuttered the once-US$2 billion Asia Opportunities Fund after Huttenlocher's resignation in March. The fund lost about 30% during the first 10 months of 2008, leading clients to demand the return of more than half of its assets and Highbridge to segregate illiquid assets and impose withdrawal restrictions. Most redemptions were paid out by the middle of 2009, a year in which Huttenlocher's fund gained 56% and surpassed its high-water mark.
Myriad was to launch with about US$300 million in internal capital before opening to outside investors next year, when it was expected to easily surpass US$1 billion in assets.