Segantii Gains 0.3% Amid Charges, Banks Pull Back

Key Takeaway

• Segantii Capital reported a 0.3% gain in April amid insider trading charges, following a 2.51% Q1 return.
• Major banks like JPMorgan and Nomura have limited dealings with Segantii post-charges, affecting its market operations.
• The case adds to global scrutiny on financial practices, highlighting regulatory efforts to ensure market fairness.

Segantii Capital's Performance Amid Legal Challenges

Segantii Capital Management Ltd., a prominent Asian hedge fund, recently provided its first performance update since facing insider trading charges in Hong Kong. Despite the legal scrutiny, the $4.8 billion Segantii Asia-Pacific Equity Multi-Strategy Fund reported a modest gain of about 0.3% in April, following a 2.51% return in the first quarter. These preliminary numbers were shared amidst efforts to reassure investors of ongoing normal operations at the firm. Kurt Ersoy, the CEO based in Hong Kong, has declined to comment on the situation. The fund's performance in the first quarter was attributed to successful relative-value trades and corporate events across Asia and Europe.

Legal Proceedings and Industry Response

The Securities and Futures Commission of Hong Kong has initiated criminal proceedings against Segantii, its founder Simon Sadler, and former trader Daniel La Rocca for alleged insider dealing related to a block trade in June 2017. The accused have not entered a plea and were released on cash bail, with restrictions pending a court hearing scheduled for June 12. Following these charges, major financial institutions such as JPMorgan Chase & Co. and Nomura Holdings Inc. have limited their dealings with Segantii. This includes refraining from new block trades, initial public offerings, and additional financing or leverage for the hedge fund.

Banks Reassess Relationships with Segantii

The insider trading allegations have prompted a broader reassessment among several major investment banks, including BNP Paribas SA, Goldman Sachs Group Inc., and UBS Group AG, which are listed as prime brokers in Segantii's investor updates. While some banks have opted to limit their interactions, others are reportedly maintaining their current positions. This varied response from the financial community reflects the potential impact of the insider trading case on Segantii's operations and its standing among global financial institutions.

Global Scrutiny on Financial Practices

The charges against Segantii emerge amidst increased global scrutiny on short selling and block trading practices. Notably, South Korea's Financial Supervisory Service has identified illegal short trades by nine global investment banks, leading to a temporary ban on short-selling until June 2024. This crackdown underscores the challenges regulators face in maintaining market transparency and fairness, emphasizing the importance of stringent oversight and compliance with market regulations.

Management Quotes

• Kurt Ersoy, CEO of Segantii:

  "Declined to comment."