Pequot Capital Management Inc., the well known hedge fund firm long based in Westport which recently moved to Wilton, is being closed down by founder Arthur Samberg amid an ongoing investigation into possible insider trading, The Wall Street Journal said today.
“Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction,” Samberg wrote in a letter that was sent to investors today, the newspaper said on its Web site..
“With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business.”
Samberg, a pioneer in the hedge-fund business, has a track record that is among the best in the business, even while dealing with an on-again, off-again investigation by both the Securities and Exchange Commission and the Justice Department, the Journal said.
Just last month, the hedge fund which had long been at Westport’s Nyala Farm office complex said it had signed a long-term lease on new headquarters at 187 Danbury Road in Wilton. (See WestportNow April 17, 2009)
The SEC has been examining whether Pequot traded Microsoft Corp. shares on confidential information provided by a former employee of the computer company who was later hired by Pequot. Pequot has denied any wrongdoing.
According to the letter obtained by The Journal, Pequot will spin out its Matawin and Special Opportunities funds, while liquidating its core funds. Samberg noted that the Pequot Partners Fund generated a net annualized return of 1.8 percent this year through April 30.
After closing the case more than two years ago, the SEC reopened its probe after new information surfaced late last year showing payments Pequot made to a key witness.
The documents, which emerged in a divorce proceeding, showed that Pequot began paying $2.1 million to former Microsoft employee David Zilkha in mid-2007. The initial $700,000 payment was made around the time Sens. Charles Grassley, R-Iowa, and Arlen Specter, R-Pa., were urging the SEC to reopen the case.
Zilkha received a second $700,000 payment last year and was slated to receive the same amount this year.
A Pequot spokesman has said the payments were related to the settlement of a civil claim concerning Zilkha’s employment and termination.
According to the paper, Samberg now manages about $3 billion, down from Pequot’s peak of $15 billion in assets.
