Platt's BlueCrest Probed by Regulators About Internal Fund

Feb 5 2016 | 9:54pm ET

Michael Platt’s BlueCrest Capital Management is being investigated by U.S. financial regulators over possible conflicts of interest created by an internal fund that manages partner capital. 

The SEC reportedly began the investigation last year, according to a Bloomberg article citing unidentified sources familiar with the matter, and other regulators have also sent queries to BlueCrest. 

The asset manager, which was once one of the world’s largest, has not been accused of any wrongdoing, and said in a statement that it is fully cooperating with regulators.

BlueCrest announced in December 2015 that it would return all outside capital to investors and revert to a private investment partnership after 13 years managing outside money. At the time, Platt blamed falling fees and lower hedge fund profitability for the move, although returns have been lackluster and redemptions high. Assets fell from a peak of $37 billion in 2013 to under $8 billion late last year.

The internal fund in question, BSMA Ltd, was reserved for BlueCrest partners and had $1.5 billion in assets in 2014, when an outside consultant raised questions about whether BlueCrest’s interests were completely aligned with those of its investors. At the time, the consultant, well-known hedge fund advisors Albourne Partners, believed BlueCrest had not been adequately forthcoming about the potential conflicts related to BSMA.

For its part, BlueCrest CFO Andrew Dodd has defended the firm’s disclosures as adequate, and noted in 2014 that the employee fund existed to help retain top talent. Moreover, he contended, BlueCrest’s internal procedures protected against conflicts of interest across all of its hedge funds.

BlueCrest’s annual filings note that members of the firm may manage funds available only to partners, employees or people connected with the firm, and that these funds may compete with client accounts when engaged in similar markets. A filing from January 2015 says that employee-only funds “may produce investment results that are substantially different from those of our clients.”

BlueCrest is on track to return most outside capital by the end of March, Bloomberg noted, after which it would still manage billions of dollars in partner and employee-owned money. 

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