Interesting mob, for sure. Nice to know OSL are getting into bed with a blue chip fund manager.
http://ioandc.com/regal-funds-payout-to-minimise-investors-pain/
Regal Funds payout to minimise investors’ pain
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BY ADMIN ON JUNE 21, 2015
Philip King
by Greg Bright
The fortunes of multi-award-winning hedge fund managers Andrew and Philip King seem to be going from bad to worse following their former board colleagues’ revelations of a query by ASIC over trading in a resources stock in 2013. Are they being punished for being clever?
Andrew, the chief executive, and brother Philip, the chief investment officer, of Regal Funds Management, had received a ‘please explain’ notice by ASIC, in the form of a civil hearing under the Corporations Act, over activity in the junior miner Syrah Resources in 2013.
Regal is an affiliate of Westpac’s multi-affiliate manager Ascalon, which owns 30 per cent of the long/short manager, and two of the directors – David Lees and Chuak Chan – were Ascalon appointees. The other two directors were the Kings.
Then, three things happened: Lees and Chan resigned from the board and in doing so revealed that ASIC investigation; the Westpac-owned Asgard pulled its funds from Regal, said to be about $70 million; and, Regal decided to make an interim distribution of other funds to protect the interests of all its investors. The size of that distribution is not known, but it is unlikely that there will be much left in the former $100-million Regal Long/Short Australian Equity fund.
What has surprised the funds management community is the resignation of the Ascalon-appointed directors. ASIC investigations such as this are not uncommon and fund managers are not obliged to reveal their existence until after the results are known.
However, according to a report in Business Insider Australia last week, a letter to unitholders from Regal’s chief operating officer, Stephen Baldwin, said: “There was a difference of opinion on the board as to whether immediate notification of the notice of hearing was warranted or whether further information and advice should be obtained. As a consequence, Mr Chan and Mr Lees resigned from the board.”
Because there was a significant reduction in the investor base, “the fairest thing to do was to make sure all investors share in the income so no-one gets an adverse tax outcome”, Baldwin is quoted as saying in reference to the latest distribution.
Andrew Main, business editor, wrote in ‘The Australian’ on June 13 that Regal was shorting Syrah Resources when it fell by 43 per cent over a few days in March and April 2013. It subsequently recovered but not before about $30 million had been wiped from the capitalisation of the thinly traded small-cap stock. Syrah Resources’ broker was Credit Suisse which had issued what were known as “mini warrants” over the stock, which is what Regal traded, probably giving its own investors and shareholders a very profitable position as the price went down and as it went back up.
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