On April 24 the U.S. district court in Chicago entered a default judgment against Philip J. Baker and the companies he controlled, including Lake Shore Group of Companies Inc., 12 Lake Shore commodity pools and Hanford Investments Ltd. Baker has not responded to complaints filed by the Commodity Futures Trading Commission (CFTC) and the court found that Baker and Lake Shore misappropriated more than $11 million, misrepresented profits and losses and failed to disclose other information relevant to commodity pools and filed false statements about them. As of press time, the court had not determined liability against Baker and Lake Shore.
In addition, all of the defendants’ assets have been frozen by the court, which has appointed Robb Evans & Associates LLC as Lake Shore’s receiver for funds on deposit at Sentinel Management Group Inc., MF Global UK Limited, Newedge Group SA and Lehman Brothers International Europe. The CFTC is seeking the return of funds, repayment of ill-gotten gains and monetary penalties for violations.
Baker, a Canadian citizen, failed to appear at his April 16 deposition and was not found at the German address provided by his lawyer. His whereabouts are currently unknown.
Never mind
The California Department of Corporations (CDC) has decided not to proceed with a proposal that would have required most hedge funds to register with the state or with the Securities and Exchange Commission. “It is a relief for everyone for the time being,” says Dennis Hirsch, partner with Sadis and Goldberg, a law firm that represents more than 500 hedge funds. “The proposed rule didn’t benefit investors, it would have only cost [the funds] money.”
A spokesperson for the CDC says the rule would have “roped in a lot of hedge funds,” and that they received many negative comments on the proposal. The main argument was that it would have led many trading advisors to leave the state.
Managed futures take off
The first quarter of 2008 has been a tale of two asset classes in the alternative investment field. Managed futures has jumped out of the gates while most equity-based hedge funds have struggled. The Barclay CTA Index returned 6.95% in the first quarter while its Hedge Fund Index was down 4.41%. Nearly all of the Barclay hedge fund sub indexes are in negative territory, except for its short bias index, though many hedge funds did better in April.
The performance is similar to 2002 when the larger hedge fund universe appeared much more correlated to struggling equity markets than advertised. Managed futures, however, typically thrive during tough periods for equities.
