AlphaMetrix Sees Cash Shortfall

Oct 15 2013 | 11:55am ET

Hedge fund services firm AlphaMetrix has warned clients that it is facing a serious cash crunch.

The Chicago-based firm's CEO, Aleks Kins, said that its AlphaMetrix LLC commodity-pool unit "has recently encountered significant cash-flow issues and is working to strengthen its current financial condition." In an Oct. 10 letter to investors, the firm said that its liabilities "greatly exceed" its liquid assets.

AlphaMetrix had $146.6 million in client assets at the end of last year.

"At the parent level, AlphaMetrix Group is working within the capital markets to improve its short-term cash flow," the firm said Friday. "Investor assets remain under the operations of AlphaMetrix LLC, which are on deposit with futures commission merchants and cash custodians and traded by independent investment advisers and commodity trading advisers in accordance with the programs and strategies chosen by each investor."

AlphaMetrix said it had fired its CFO, George Brown, in the wake of the shortfall and brought on accounting firm Arthur F. Bell Jr. & Associates to review its internal controls and record-keeping policies.

The shortfall is notable at a firm that has billed itself as a safe-haven for investors in the wake of the Bernard Madoff scandal. In 2010, Kins boasted that clients were flocking to the firm, seeking "independence, due diligence, and checks and balances."

"The situation at AlphaMetrix should help focus investor attention on a  frequently overlooked but vital issue for hedge fund investors—the financial strength of counter-parties," Kenneth Phillips, CEO of managed-accounts platform HedgeMark, said. "This is not about the managers or the strategies, per se.  It’s about the ability of the platform provider to follow through on its financial and operational commitments to all the parties. Fund administration, securities pricing, operations and securities safekeeping are services that require substantial expertise and a well established, well capitalized, and well regulated counterparty."


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