Millennium Hedge Fund Putting Up Legal Reserve

Millennium Partners, one of the hedge funds at the center of the mutual fund trading scandal, has set aside 10% of its investors' money in preparation for a possible settlement with federal or state regulators.

Investors at the $3.2 billion hedge fund run by Israel Englander, the storied Wall Street trader and buyout specialist, learned in December that some of their money would be set aside for the firm's legal reserve, even as backers clamored for their cash. About $800 million has streamed out of two Millennium hedge funds since the firm surfaced in the mutual fund late-trading and market-timing scandal last October.

Millennium's decision to set up a legal reserve looks prudent, particularly after a former trader, Steve Markovitz, pleaded guilty in October to making illegal late trades in shares of mutual funds. The action is similar to one taken by Veras Investment Partners, a Sugar Land, Texas, hedge fund that put away up to $100 million to cover any fines and penalties regulators might impose in their investigation of its role in the mutual fund scandal. ...