U.K. Launches Probe Into Hedge Fund Dynamic Decisions

Nov 13 2009 | 12:53pm ET

British authorities have launched a probe into hedge fund Dynamic Decisions Capital Management, whose funds are being liquidated in the Cayman Islands.

The U.K. Serious Fraud Office said it opened the investigation at the urging of the U.K. Financial Services Authority, which referred it the case. Both the FSA and SFO have received complaints about the firm’s investment activities, the SFO said.

The SFO probe is the second to look into Dynamic Decisions’ activities. The court-appointed liquidator of its DD Growth Premium funds, which manages US$550 million, Grant Thornton, launched its own investigation after investors complained about the hedge funds’ investments. The investments in question apparently are some corporate bonds purchased late last year.

“Allegations have been made that these bonds not only fell outside the parameters of the mandated investment strategy of the fund, but that the bonds had no real value,” Grant Thornton said. The accounting firm added that its investigation was ongoing, but that the bonds aren’t worthless. “Interest has been expressed by an interested party in acquiring the bonds at a substantial proportion of face value.”

Dynamic Decisions said it was “surprised” by the SFO probe.

“This investigation will result in the same conclusion that other third parties have reached in the last eight months, that the sequence of events that led to the liquidation of the Cayman funds was a reasonable response to unprecedented conditions.”

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