Executives at managed futures managers, commodity trading advisers and hedge funds are furious and stymied over non-payment of fee rebates owed to them by AlphaMetrix Group LLC.
“We were continuously chasing them for their payment,” said Bruce Mumford, director of marketing/investor relations, 2100 Xenon Group LLC, Chicago, a fund manager that traded in futures for clients that placed investments through AlphaMetrix. Mr. Mumford said AlphaMetrix is still four to five months behind on paying his fee rebates.
The firm has just five days to pay $600,000 of management and incentive fees owed to some of the fund managers on its managed account platform.
Payment might not be forthcoming, despite the relatively tiny amount in contention, sources said.
AlphaMetrix Group has “recently encountered significant cash flow issues” and has been unable to provide cash to its commodity pool operator subsidiary that manages the investment platform, according to an Oct. 10 letter to investors from Aleks Kins, AlphaMetrix Group CEO and president. Pensions & Investments obtained a copy of Mr. Kins' letter.
The National Futures Association ordered Chicago-based AlphaMetrix to pay the managers by 5 p.m. CST Nov. 1 or face prohibitions on trading within the underlying manager pools, or disbursing or transferring assets from client and fund manager accounts without NFA approval.
In the meantime, AlphaMetrix is forbidden from soliciting or accepting any new assets until the fund managers are paid in full.
The result of the firm's cash crunch is that the commodity pool operator has not been able to pay fee rebates it owes to some of the external hedge fund managers on the platform. Those fees should have been reinvested into various funds on the platform and the fact that they were not “may have an impact on the pools' net asset values,” Mr. Kins' letter said.
“Given that AlphaMetrix's and the CPO's liabilities greatly exceed their liquid assets,” both companies are working to improve the company's financial position, Mr. Kins wrote in his letter.
Mr. Kins said AlphaMetrix terminated George Brown, the company's chief financial officer and Mr. Kins' brother-in-law, and has brought in alternative investment specialist accounting firm Arthur Bell CPAs to review and help with improving internal financial controls.
The NFA, the managed futures industry's self-regulating body, issued the order against AlphaMetrix, an association member, on Oct. 21, according to a copy of the member responsibility action case, which is available at www.pionline.com/nfa-action.
The NFA document said the association took the action “deemed necessary to protect AlphaMetrix's pool participants because AlphaMetrix has withdrawn management and incentive fees from various pools that were earned or owed to third-party money managers.” AlphaMetrix also did not reinvest about $600,000 of fee rebates, the document said.
The withdrawal and non-investment of these fees constitute a direct and an indirect loan, the NFA said.
“AlphaMetrix has and will continue to cooperate with NFA,” according to a company statement provided by Conor Shea, a company spokesman.
Mr. Shea said Mr. Kins was not available for an interview by press time.