New York (HedgeCo.Net) – The SEC has targeted hedge funders David Myatt and William Eichengreen, both of Directors Performance Fund, with charges of fraud. 

The two men allegedly took $25 million of their investment advisors money and put it into a “prime bank” scheme.  This kind of scheme generally involves investors fraudulent claims that funds will be used to purchase “prime” financial instruments, usually in overseas markets, with the promise of high returns.  Most of the time, neither the instruments nor the markets they supposedly trade on through special “access” even exist.  In this case, Myatt and Eichengreen promised returns in excess of 10% per week with minimum risk.

Eichengreen then falsified documents pertaining to performance while lying about the fund strategy and asset allocation.  The hedge fund also raked in performance fees that were based on the doctored numbers. 

Investors in the fund should receive their money back, after a previous suit resulted in the court being responsible for distributing the assets back to investors.  Myatt also previously pleaded guilty to an obstruction of justice charge that was brought against him in connection with this hedge fund.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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A new report released Monday by HedgeFund.net estimates the assets under management by hedge funds have reached nearly $3 trillion.

According to the report, hedge fund assets increased 4.41 percent last quarter, in spite of rough equity markets, to reach $2.973 trillion. The report combined data from a bi-annual survey of hedge fund administrators and information from HedgeFund.net’s database of more than 8,400 funds.

Peter Laurelli, vice president of Channel Capital Group which owns HedgeFund.net, said hedge fund assets will probably top $3 trillion sometime in the next couple of quarters, depending on performance.

Fund performance accounted for $91.28 billion being added to hedge funds last quarter, while investors placed an additional $34.21 billion in new assets with hedge funds. One dark spot for the industry was that liquidations of funds last quarter exceeded assets in newly established funds by $8.52 billion. Second quarter saw the third-highest level of hedge fund closures on record.

"It’s a natural evolution of the industry if you have funds that are not performing well," Laurelli said. "When you go through a period like we’ve had where there have been some large losses in the industry, you’re going to have fund closures. That doesn’t mean that the industry is contracting, it just means that there is some turnover."

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