Chicago Hedge Fund Manager Knew He Had To Make Up Money To Make Money

SEC enforcement orders against low-grade investment hucksters are among my favorite literary genres, full of oddball characters, devious drama, and silly names for hedge funds. Part of me wants the SEC to just issue fake enforcement orders when they don’t have any real cases – no one would know the difference, and I would read them all1 – but I guess you can’t, as they say, make this stuff up.

Today there is Umesh Tandon, “the CEO of Chicago-based investment advisory firm Simran Capital Management,” who, remembering the old adage that it takes money to make money, told CalPERS that he was a big-shot hedge fund manager when he was in fact a small-shot hedge fund manager. In hindsight this should have been obvious because, I mean, just look at what he named his hedge funds:

Simran served as a subadviser to funds managed by other advisers and provided advisory services to its own private onshore fund (Simran Pre-Event Driven Activist Opportunity Fund LP) and a private offshore fund (Simran Pre-Event Driven Activist Opportunity Fund Ltd), both of which fed into a master fund.

“Pre-Event Driven Activist Opportunity Fund” is my new favorite fraudulent hedge fund name. Surely “pre-event driven” should mean “we trade on inside information,” though realistically it means “we have no idea what we’re talking about.” Also amazingly the fund did, or supposedly did, something totally unrelated to events, activism, opportunity, whatever: “Tandon marketed Simran as an experienced fixed income manager that applied a unique risk-averse strategy bearing a low correlation to equity and debt markets.” Perhaps the unique strategy was fraud.

Though, considering that name, Tandon’s fraud was surprisingly mild:

In 2008, the California Public Employers’ Retirement System issued a request for proposal to select investment managers. Among other things, CalPERS required that applicants, as of December 31, 2007, manage at least $200 million for institutional clients. The request for proposal stated that failure to satisfy the minimum qualifications would result in rejection of the applicant.

In May 2008, Tandon, on behalf of Simran, falsely certified that Simran met CalPERS’s minimum qualifications, including that Simran managed at least $200 million for institutional clients as of December 31, 2007. Simran actually managed only approximately $80 million as of year-end 2007. Indeed, Simran’s Form ADV, filed with the Commission in February 2008, reported that Simran had $102 million of assets under management – itself a falsely inflated number.

CalPERS gave Simran $50 million, which ultimately grew to $122 million by 2010; the SEC order doesn’t specify how much of that was investing returns and how much was additional inflows, though CalPERS demanded its money back in April 2010 so I guess the performance wasn’t that great? I don’t know. That seems like a key detail to leave out.

Anyway now he’s in trouble for defrauding CalPERS,2 settling with the SEC for a $100,000 fine and a $20,000 reimbursement to CalPERS, which, again, key omitted detail is why twenty thousand dollars? The SEC order doesn’t say how much CalPERS paid him in fees though I hope it was $20,000? On ~$100mm of assets for ~2 years? If CalPERS really paid him 1 basis point a year, he should sue them.

You might reasonably criticize CalPERS for failing to notice this fraud in the first place – remember that Tandon’s application and his publicly filed Form ADV had very different AUM numbers, which CalPERS could easily have noticed. Also, um, the name. This made me curious enough about CalPERS’s selection process to go look and it appears to be, like, a blind internet resume drop:

To Submit Hedge Fund Investment Proposals
Proposals for investments for the ARS [absolute return strategies] program should be submitted to the advisor or FoHF manager(s) relevant to the appropriate part of the program. Due to the large volume of proposals, neither CalPERS nor its advisors and partners can guarantee a reply to every proposal that is submitted.

So, yeah: CalPERS is so overwhelmed by the number of hedge funds pestering it that it can’t even write back to all of them. You can hardly blame them if a few fake ones slip through the cracks.

SEC Charges Chicago-Based Investment Adviser with Defrauding CalPERS and Other Clients [SEC]

1. I would write them, SEC, if you want; be in touch.

2. Also for defrauding other customers:

Although procured by fraud, Tandon touted, and instructed others to tout, Simran’s selection as an adviser by CalPERS to the public, to other current clients, and to prospective clients, all of whom were unaware that the relationship with CalPERS was procured by fraud.

Well but he was selected by CalPERS! It was true! Seems very unsporting of the SEC to get mad at a guy for truthfully boasting about a client relationship just because that client relationship happened to be secured by fraud. What was he supposed to do? Though TBF he also overstated his assets to those other clients.

(hidden for your protection)
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18 Responses to “Chicago Hedge Fund Manager Knew He Had To Make Up Money To Make Money”

  1. Welcome to the Bigs says:

    Really Tandon? Pre-event Driven Activist Opportunity? Nonesense. In the big leagues you need a fund with a clear name and strategy. Like my Gold Fund.


  2. young analyst says:

    We gave him money because he was one of Trader Magazine's 30 under 30.

  3. guest says:

    pre event driven activist opportunity = OWS clown hopped up on skunk weed and ritalin, banging bongo drums and yelling marxists slogans outside a music festival in madison wisconsin.

  4. dyingearth says:

    CalPERS's solution to any fraud, shortfall is more tax dollars. Since Democrats that runs the state is 100% beholden to them, this isn't much of an issue (and Democrats now have 2/3 super majority so they can pass any tax they want).

  5. Rebecca Martinson says:

    Hey CalPERS, we have BEEN FUCKING SUCKING in terms of hedge fund due diligence.

  6. Mary Jo White says:

    Is footnote 1 for real? If so I know what my first order of business is.

    -Gal who has been pretending to do client work while really reading Matt posts in her office at Debevoise for some time now.

  7. Guest says:

    Mr. Levine,

    Thank you for your application. We appreciate your enthusiasm for the work we do, and your understanding of our methodology is impressive.

    Unfortunately, in reviewing your previous work, we have to note a sad lack of bad puns and dumb jokes. As I am sure you are aware, we enjoy including "zingers" that spice up our releases and give lazy reporters easy quotable quotes; e.g., "Mr. Finney boasted that his investment in airlines was going to take off, but in reality his strategy crashed and burned", or, "Ms. Jones touted her academic credentials, but all she had was a two-year degree in fraud", and so forth.

    We recognize your potential, and we look forward to hearing from you at some point in the future when you have mastered the art of groan-inducing humor.

    The SEC

  8. hmjjbe says:

    The pitch for the "Simran Pre-Event Driven Activist Opportunity Fund"…

    Tandon: Did you ever see "Back To The Future"? Yea, it's kind of like that.

  9. Miles Willcod says:

    Missed opportunity to name his fund PAEDOF LP

  10. guest says:

    Something tells me that the "Pre-Event Driven Credit" fund strategy was buying bonds right before coupon payments, selling them right after, and being surprised when you didn't profit handsomely.

  11. NocturnalRob says:

    Umesh is in line for a cunt punt.

  12. Fewdollarsmore says:

    What does a man gotta do? She asked me to tweet a picture to show that I was well endowed. I could have tried the medication claiming effective enlargement, but had no time to test its efficacy. So I just photoshopped and sent the pic with a request to fund my fore-play driven opportunistic activity. To my credit, I did not claim that it was the largest but just big enough to merit a consideration. I got myself a date and soon enough posted the details of my accomplishment on my Facebook page, hoping to win some more Likes that I badly needed. SEC was upset that I lied to get laid. But what does a man do if every bitch, no matter how promiscuous, judges you by your size and not by the quality of orgasm you can deliver?
    – Umesh Tandon

  13. Pakistani says:

    Another Indian…
    'Nuff Said!

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