Hedge Funds: Bizarre case of Florian Homm puts the spotlight on AIM
The contrast with US regulation could hardly be more stark, writes Neil Wilson.
The growth of the hedge fund industry in Europe has hitherto been remarkably scandal-free. This contrasts starkly with the US, where there has been a continuing series of blow-ups and frauds – with egregious cases such as Manhattan, Lipper, Lancer, Beacon Hill, Durus, Bayou and Wood River continually cropping up, and keeping the media filled with bad news about hedge funds. But there has always been the risk that, as the industry in Europe grew, problems would sooner or later emerge there too. In recent weeks, with the remarkable goings-on at Absolute Capital Management – a hedge fund management company publicly listed on the Alternative Investment Market (AIM) in London – it looks uncomfortably as if we have our first such scandal.
The recent extraordinary sequence of events arguably began with the abrupt resignation in September of Absolute Capital founder Florian Homm, although no one appears to have paid much attention when chief executive Sean Ewing resigned just a couple of months before his colleague. As one commentator quipped, when Homm left he appeared to have "flounced off in a huff", also making the strange revelation that he had used some €30 million-worth of his own shares to prop up the firm’s funds in August (an intervention not revealed to investors at the time), together with the allegation that he was unwilling to stay if other senior people at the firm declined to follow suit.