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London hedge fund collapses 23 March 2009

It has emerged that Peterson’s wife was on the board of the UK company, while his brother and stepfather were on the board of the Caymans fund.

PwC have been appointed as liquidators of the fund, which has had consistent returns of 10-12 per cent over the previous five years.  The FT reported that PwC had been told the BVI company's assets were $10m of cash and $40m of private equity positions, which would result in a substantial shortfall to investors.

Matthew Wilde, partner and head of PwC’s Hedge Fund restructuring team, said:

“Over the period since early November 2008, the Fund had received redemption requests exceeding $223million but could only meet $90million of these. With a further wave of provisional redemptions of up to $65million in the pipeline, the directors of the Fund called us in to look at the options.

“The resolution to wind-up the Fund was made after a brief review concluded that its balance sheet value, most recently $506m, was almost entirely dependent on the value of a series of interest rate swaps, totalling $637m, which had been struck with a company which was revealed to be a related to the Fund manager and that lacked the value necessary to support the swaps. This left the Fund with no reasonable prospect of paying its debts and no option but to request that liquidators be appointed”.

“It appears likely that there will be a very substantial shortfall to the Fund’s creditors and its remaining shareholder investors may be left with little. It is clear that there is much to be understood about the circumstances of these trades and creditors and shareholders will soon be advised of details of a meeting of creditors to which the liquidators will report their findings”.
The SFO is understood to have requested a meeting with PwC as a matter of urgency. 

Questions will also be asked of auditors Ernst & Young, after it emerged that accounts for the fund covering 2007 contained no mention of the related BVI company which formed 98% of the fund’s assets.

Paul Clark and Geoff Boucher of MCR were appointed joint administrators of the UK management company, while PwC is dealing with the liquidation of the Caymans based fund.

 

 

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