It used to be big news when hedge funds were subpoenaed in a federal investigation.
These days, finding a US hedge fund that isn't being quizzed by the FBI, the US attorney office's or the Securities and Exchange Commission (SEC) as part of their latest investigation into insider trading is a much bigger stretch.
Only three funds, Level Global Investors and Diamondback Capital Management in Connecticut and Loch Capital Management in Boston, were raided by the FBI last week as part of an ongoing federal investigation into whether hedge funds, and the consultant companies that connect them with industry experts, have been sharing information that is not public.
But what began as an insider trading inquiry at the Galleon Group, a New York hedge fund, three years ago has turned into an investigation of what is alleged to be multiple interconnected insider trading rings- and almost 40 hedge funds, mutual funds, investment banks and consultants have received subpoenas.
And a barrage of subpoenas does not make a case. To date, only Don Ching Trang Chu, who worked for Primary Global Research, a consultant or so-called expert networking firm paid to link industry insiders with investment managers, has been arrested.
He has been charged with providing Richard Choo-Ben Lee, an analyst at an unidentified hedge fund, with inside information about three telecommunications companies, Atheros Communications, Broadcom and Sierra Wireless, in return for payments.
It is true that The Wall Street Journal reported last week that federal authorities plan to make many more civil and criminal charges by the end of the year.
It is also true that some of Wall Street's top firms at the very least will have a lot of explaining to do.
Take the example of SAC Capital Advisors, one of the largest hedge funds to have been subpoenaed.
Richard Choo-Ben Lee, whose co-operation with authorities has led to the most recent charges against Mr Chu, has already pleaded guilty to insider trading in his former job at SAC. On top of that, two of the funds that were raided last week were founded by ex-SAC Capital staff and at least one expert network provider has revealed he was asked by the FBI to wear a wire to glean more information about SAC, among others. However, the scope of this investigation does not mean that a culture of insider trading is pervasive in the industry.
What it certainly demonstrates, though, is that following the Bernie Madoff debacle and others, federal authorities cannot afford to miss any sign of investment fraud.
The SEC's enforcement division has a new mandate to aggressively pursue insider trading cases and the US attorney's office is also making a crackdown on insider trading a priority.
As a result, they are launching investigations a lot more quickly. It used to take months for the SEC to approve subpoenas. Now, if it believes a fund has information about insider trading, or even information about another fund's insider trading, it can issue a subpoena within a week.
Whereas the SEC used to take three to four years carefully developing a case, now it is more interested in taking testimony and trying to get the target to agree to an early plea agreement and settlement before it moves on to the next fund.
The authorities are not even waiting for subpoenas anymore to find the information they want. The FBI successfully debuted secret wire taps to collect evidence during the Galleon insider trading investigation and it looks keen to offer information gleaned through this method to press further charges.
This latest federal crackdown could result in some serious criminal charges within an industry that has already been tarnished over the past few years by a series of high-profile investment frauds.
For now, though, the only thing that is conclusive about the scope of this investigation is that federal authorities are throwing a lot more mud around these days in the hope that some will stick.
business@thenational.ae
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
End of free parking
- paid-for parking will be rolled across Abu Dhabi island on August 18
- drivers will have three working weeks leeway before fines are issued
- areas that are currently free to park - around Sheikh Zayed Bridge, Maqta Bridge, Mussaffah Bridge and the Corniche - will now require a ticket
- villa residents will need a permit to park outside their home. One vehicle is Dh800 and a second is Dh1,200.
- The penalty for failing to pay for a ticket after 10 minutes will be Dh200
- Parking on a patch of sand will incur a fine of Dh300
More from our Neighbourhood series:
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
AIDA%20RETURNS
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Results
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The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
COMPANY%20PROFILE
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DUBAI%20BLING%3A%20EPISODE%201
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2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, Leon.
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
SANCTIONED
- Kirill Shamalov, Russia's youngest billionaire and previously married to Putin's daughter Katarina
- Petr Fradkov, head of recently sanctioned Promsvyazbank and son of former head of Russian Foreign Intelligence, the FSB.
- Denis Bortnikov, Deputy President of Russia's largest bank VTB. He is the son of Alexander Bortnikov, head of the FSB which was responsible for the poisoning of political activist Alexey Navalny in August 2020 with banned chemical agent novichok.
- Yury Slyusar, director of United Aircraft Corporation, a major aircraft manufacturer for the Russian military.
- Elena Aleksandrovna Georgieva, chair of the board of Novikombank, a state-owned defence conglomerate.
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
