Davy-sponsored fund probed

A DAVY Stockbrokers sponsored $900 million hedge fund, listed on the Irish stock exchange, is being investigated by the US securities and exchange commission following allegations that the value of the fund reported to investors was inflated.

US hedge fund giant Clinton operates the Trinity fund at the centre of the investigation. The Trinity fund is Clinton's flagship fund in its six fund $9.1 billion hedge fund business.

A Clinton senior trader, Tony Barkan, quit last month making allegations that his employer was overstating the value of a number of funds it operated to investors.

Mr Barkan departed very publicly, releasing a statement saying he resigned in a dispute with senior management over the pricing of asset-backed bonds. A statement issued to the ISE yesterday by Clinton on the Trinity investigation stated: "The directors of the fund wish to confirm that, following the resignation of Anthony Barkan from Clinton Group Inc, the investment manager, on October 29, 2003, and subsequent allegations made by Mr Barkan regarding the valuation policies of the fund, the US Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) launched an investigation into the valuation policies of the Fund.

"The fund is co-operating closely with applicable government authorities and is supplying such authorities with all requested documentation."

The company has issued similar statements about the Clinton MultiStrategy Fund and the Clinton Global Fixed Fund, which are also sponsored by Davy Stockbrokers and listed on the ISE. The Irish Stock Exchange has close to 5,000 international funds listed on the exchange and the Trinity fund is one of these. Davy Stockbrokers sponsored its admission to the exchange but plays no role in the funds administration, which is carried out by the Clinton Group.

The ISE did not comment on the investigation last night but it is understood the SEC is the lead regulator in the investigation.

Since August, Clinton has lost a reputed $1.5bn to investor redemptions and the departure of key executives bring unwelcome public scrutiny.

Dublin has stolen a march on Luxembourg as the main location for so-called 'technical' listings of specialist funds. The Irish Stock Exchange has aggressively and successfully targeted this market and now has over 5,000 funds listed, earning more that 50% of its 11m annual revenue from fund registrations and fees. It is now the world leader in this field.