Irish Stock Exchange silent on collapsed listed hedge fund

[EireWarrior]

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ARTHUR BEESLEY, Senior Business Correspondent

THE IRISH Stock Exchange (ISE) has declined to say whether it is investigating or has investigated the affairs of a collapsed hedge fund, listed for years on the Dublin market, whose top manager and a senior colleague were arrested last week in an inquiry by Britain's Serious Fraud Office.

The $637.1 million (€470.7 million) Weavering Macro Fixed Income Fund, which was incorporated in the Cayman Islands and listed on the ISE in August 2003, is an offshoot of Weavering Capital UK, a British advisory business which has been in administration since March.

The fund ranked among more than 30,000 international securities listed on the ISE, a very important business for the Dublin market and its members.

The Weavering Macro Fixed Income Fund, which was targeted at high-net-worth clients, went into voluntary liquidation last March after it had failing to meet its investor demands for withdrawals.

While its main unencumbered asset was a series of derivative transactions valued in its balance sheet at $637.1 million, the derivative counterparty had a net worth not exceeding $50 million.

The fund liquidator, PricewaterhouseCoopers (PwC), has described the counterparty as a British Virgin Islands entity "effectively under common control" with Weavering Capital UK.

When the Irish Stock Exchange listing of the Weavering Macro Fixed Income Fund was suspended, the fund itself said an investigation into its assets had "revealed a related party transaction in the form of a large interest rate swap position of a material amount where the counterparty is a company controlled by a related party".

At issue in British investigations into the fund is whether the connection between the two counterparties should have been disclosed under ISE rules to investors as a related party transaction.

A Serious Fraud Office inquiry into these matters led to the arrest last Friday of two senior figures involved in Weavering's management.

Police seized computers, papers and other hardware from the houses of both individuals.

When asked whether the ISE had conducted any inquiries into the fund's affairs, a spokeswoman declined to provide any information.

"Our policy is not to comment on any investigation that may or may not be taking place," she said.

As a matter of course, she added, ISE officials monitor company announcements and exchange announcements.

Weavering's difficulties were triggered by investor requests for the redemption of $223 million in client money based on its value early this year.

The fund could meet only $90 million from cash available to hand, leaving a shortfall of $133 million.

PwC was called in to manage redemption and quickly concluded that the fund had no prospect of meeting redemption requests.

The fund's ISE listing was suspended on March 11th and it was placed in liquidation a week later.

In a related development yesterday, the delisting of an ISE-listed sister fund of significantly more modest scale was announced on the ISE website in connection with the bigger fund's liquidation.