The Serious Fraud Office (SFO) has launched a criminal investigation into a $500 million (£302 million) London hedge fund after receiving complaints from investors and a referral by the City’s chief regulator.
The SFO said yesterday that it was investigating Dynamic Decisions Capital Management, a hedge fund based in Chelsea that was founded by an Italian finance professor five years ago.
It said that the case had been referred by the Financial Services Authority (FSA), which is understood to have been monitoring the fund for eight months.
Alberto Micalizzi, professor of finance at Bocconi University in Milan, was, until February, Dynamic Decisions’ chairman but was forced to resign by other board members.
Dr Micalizzi told The Times that he would be flying back to London to clear his name. He said he had done nothing wrong and he had “elements in my hand to show it”. He added: “The investigations are not founded. There have been complaints from investors about the delays in payment of redemptions,” Dr Micalizzi said.
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He said that he was “taken by surprise” by the investigation. A potential buyer for some illiquid assets had been identified and investors should receive most of their money back.
The hedge fund has been registered in the UK since 2004. Its funds are operated from the Cayman Islands, an offshore financial centre favoured by investors for its light tax treatment.
The SFO said that specific complaints had been received about Dynamic Decisions Growth Premium Master Fund in the Caymans, which is served by two further feeder funds. The master fund was forced into liquidation in May after it was unable to meet investors’ redemption demands.
The fund, valued at about $550 million last December, traditionally invested in European and US shares, according to Dr Micalizzi. However, in the fourth quarter of 2008 it switched a slice of assets into fixed-income securities, which became far harder to value and subsequently to sell, he said.
Dr Micalizzi said that the board supported the change in investment policy. The SFO said that anyone with any information should get in touch.