By Nell Mackenzie, Farouq Suleiman and Kirstin Ridley
LONDON (Reuters) -Odey Asset Management is in advanced talks to move funds and staff to other asset managers as it grapples with the fallout of sexual misconduct allegations against its founder Crispin Odey.
The Financial Times and Tortoise Media reported that 13 women had alleged that Odey had sexually assaulted or harassed them over a 25-year period.
Odey, one of Britain’s best-known hedge fund managers, last week told Reuters that the report was a “rehash of an old article and none of the allegations have been stood up in a courtroom or an investigation”. A spokesperson for the hedge fund declined further comment on Thursday.
Several major banks, which provided prime brokerage services, have said they would cut ties with Odey’s firm.
A letter signed by Odey Asset Management’s (OAM) partners said any sale or rehousing of funds was subject to regulatory approvals and due diligence, adding that the boards and managers of the funds were “supportive” of the plan.
“Acting in the best interest of our investors and our staff has continued to be our primary concern over the past few days. We will continue to update you,” the letter, which was seen by Reuters on Thursday, added.
Hedge funds such as OAM rely on leverage from prime brokerage service providers to make their market bets. Without a prime broker, a hedge fund which needs to borrow stocks cannot function. OAM takes long and short positions in equities.
Goldman Sachs, Morgan Stanley and JP Morgan have already entered the process to wind down service agreements they had with OAM, sources told Reuters. This can take up to 90 days, but the process is often shorter, one source added.
UBS, listed in public filings as one of OAM’s prime brokers, has not had an active relationship with the hedge fund “for a long time” but has also decided to wind down its inactive relationship, another source told Reuters.
The banks all declined to comment.
Britain’s Financial Conduct Authority (FCA) declined to comment on OAM’s moves and on whether it would remain a going concern. A spokesperson for OAM also declined to comment on whether the moves signalled that the hedge fund would close.
CULTURE CONCERNS
OAM ‘gated’, the industry term used when a fund prevents withdrawals, its Brook Asset Management fund managed by James Hanbury on June 12 and closed another, a separate letter to investors seen by Reuters on June 13 shows.
The OAM board said it took the decision to gate the Brook Developed Markets Fund after it faced “redemption requests in excess of ten per cent of the net asset value”.
Lawmakers on Britain’s Treasury Select Committee wrote to the FCA on Wednesday to question the regulator’s supervision.
Its questions include whether the FCA scrutinised Odey’s move in November 2020 from a role requiring FCA approval of his personal suitability, to one where this was certified by OAM.
The committee also asked the FCA how many people it has investigated for sexual harassment across the industry since December 2019, when it became responsible for supervising the conduct of senior managers.
The letter is likely to spark increased scrutiny of the watchdog’s handling of Odey, after it began an investigation into alleged misconduct by him in 2021.
“Culture in financial services and the experiences of women in the industry are ongoing concerns of the Treasury Committee,” said the letter, signed by committee chair Harriett Baldwin.
The committee has asked the FCA to respond to questions demanding granular details about its two-year investigation of OAM by July 5.
(Reporting by Nell Mackenzie; Editing by Sinead Cruise, Dhara Ranasignhe and Alexander Smith)
