In a stunning turn involving one of the hedge fund world's brightest stars, Arthur Samberg announced that he's winding down his shop --
Pequot Capital Management
. Media reports have been flying fast and furious all day following the airing of a letter, first obtained by the
Wall Street Journal
. In it, Samberg, 68, told investors that an ongoing Securities and Exchange Commission investigation has made it "untenable for the firm and for me" to stay open.
After 2001, the SEC began looking into allegations that Pequot traded on insider information involving shares of Microsoft. The investigation was closed in 2006, only to reopen in 2008 following the surfacing of new evidence. Documents showed that David Zilkha, a former employee of the software company later hired by Pequot, was on pace to make $2.1 million in total payments from Pequot after the closing of the initial investigation.
Samberg's letter explained that Pequot's core funds will be liquidated and the bulk of that money will be returned to investors by June 30. Meanwhile, two other funds -- Matawin and Special Opportunities -- will be spun out under different leadership by the end of the year. Details on the moves are forthcoming.
At one time, the hedge fund was one of the largest in the world with $15 billion in assets under management. According to a recent regulatory filing, the Westport, Connecticut operation now manages over $3 billion.
Not letting the firm's demise put a damper on the fund's past successes, Samberg wrote in the letter that "a client who invested in the Pequot Partners Fund at inception earned a net annualized 16.8% return over 22 years vs. the S&P's 8.5% return during this period."
"I know this news may come as a surprise to you, but I am convinced it is the right decision for all concerned," Samberg said in the letter.
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