CIBC Asset Management, one of money manager Aletheia Research & Management's last large remaining clients, is seeking court permission to terminate the firm as subadviser for more than $600 million in four mutual funds.
CIBC on Monday asked U.S. Bankruptcy Court Judge Barry Russell in Los Angeles for permission to terminate Aletheia as subadviser for its Imperial U.S. Equity Pool, Frontiers U.S. Equity Pool, Renaissance U.S. Equity Growth and Renaissance Global Focus funds, saying it no longer has confidence in the firm.
The assets are more than half of Aletheia's estimated $1.2 billion in assets.
Aletheia filed for Chapter 11bankruptcy protection on Nov. 11 and last week an attorney for the SEC revealed in court that commission staff wants to file fraud charges against the firm's top management for anti-fraud, disclosure and internal violations of the Investment Advisors Act of 1940 and the Securities Exchange Act of 1934.
In the court papers, Gary Grad, CIBC director of investment management research, said his firm has lost “all confidence” in Aletheia because of the events of the last few months, including learning of the departure of Aletheia's general counsel, Jorge DeNeve, through a Google alert and Aletheia failing to disclose declines in its assets under management, despite CIBC's request for transparency on both matters.
Mr. Grad said Aletheia had estimated it has lost $300 million since the Chapter 11 bankruptcy filing on Nov. 11, with some of the loss due to retail clients switching managers. The retail clients had chosen Aletheia as a subadviser through the CIBC Woody Gundy Investment Consulting Service.
CIBC attorney Frederick Hyman said in the court papers that CIBC believes it has the right to terminate Aletheia without court permission, but “out of abundance of caution, and for purposes of full disclosure” the firm is seeking a court order.
Under federal bankruptcy rules, financial transactions relevant to a firm under bankruptcy protection generally need permission of the bankruptcy judge.
Mr. Hyman said he would not comment and a secretary answering the phone for Peter Eichler Jr., Aletheia, CEO, chief investment officer and chairman, said Mr. Eichler would not have comment at this time.
In a news release issued to Pensions & Investments Tuesday; CIBC spokesman Kevin Dove said new subadvisers will be announced when all details are finalized. He said the assets continue to be under custody with CIBC Mellon Trust and are not affected by Aletheia's Chapter 11 filing.