Fortress Investment Group has hired a team of hedge fund managers from Deutsche Bank, two of whom are the subject of a complaint from another US hedge fund, The Wall Street Journal reports.
London-based Magnus Lorrain-Smith, who has worked at Deutsche for nearly 25 years, Ben Keefe and New York-based Apostolos Peristeris left Deutsche in October and are set to join Fortress, the New York-based investment manager with $72.4bn in assets, according to two people familiar with the matter.
Lorrain-Smith ran, with help from Messrs. Keefe and Peristeris, the $1bn Aggregator fund at Deutsche. It buys stakes in hedge funds, private equity and other funds in the secondary market, in which sellers can unload stakes in illiquid funds to buyers hoping to pick up assets at a discount.
Their move comes amid a legal battle involving Deutsche’s Alternative Asset Management (UK) Limited unit and Messrs Keefe and Lorrain-Smith. They are among defendants in the case, which has been brought by Yorkville Advisors.
In a complaint filed in US District Court in Newark, New Jersey in late September and amended this week, Yorkville accuses the defendants of fraud and says they engaged in a “nefarious scheme” and made “false” statements to Yorkville. The defendants have so far not responded in court.
Keefe did not respond to a request for comment, while Lorrain-Smith declined to comment. Peristeris also declined to comment.
Having built up a large stake in Yorkville’s main fund, Deutsche, Keefe and Lorrain-Smith, with help from the other defendants, “misused this position” to get confidential information, the complaint alleges. It claims this information was then used “to interfere with, target and raid” Yorkville’s assets.
The case centers on an Australian mining company, Compass Resources, which was controlled by Yorkville. The defendants’ plan was to “gain control of CMR’s [Compass’s] board and use it to improperly drive the company into administration,” the complaint says. “Once CMR was in administration, defendants would wipe out Yorkville’s interest and pick off CMR’s assets for themselves at bargain prices.”
Yorkville itself, which once ran $1bn in assets, is subject to legal action by the US Securities and Exchange Commission, which has charged it with overvaluing assets and exaggerating returns. Yorkville didn’t respond to a request for comment.
Tim Gascoigne, Deutsche Asset Management’s head of hedge fund advisory and former global head of portfolio management at HSBC Alternative Investments, is taking over management of the Aggregator fund, said a person familiar with the matter.
Write to Laurence Fletcher at [email protected]