'A Spreadsheet Did The Calculations' Not A Convincing Enough Excuse To Keep SEC From Probing Your Hedge Fund

An update from the fund that never loses money.
By Ignass1500 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

By Ignass1500 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Last summer we met Joseph A. Meyer, Jr. and his hedge fund Arjun, LP, whose chief innovation evidently consists of the pledge that its investors won't lose any money, period. As armies of PhD-toting quants at AQR and Bridgewater jostled futilely for mere basis points of quant alpha, the Georgia-based Arjun has posted returns of 13, 24 and even 91 percent. His secret? Let the man himself explain:

  • “I’ve got a spreadsheet that did the calculations.... And then I just got coders to code it, so that the computer’s coming up with it, ’cause I can’t, I couldn’t, manually do something like that.”
  • “All it does is look at the last trade and calculate trades that would be equivalent of, ‘What if this security increases 50 percent in value in the next three seconds.”’
  • He tweaks his program every 16 months or so.

It's the nature of genius to provoke hostility, and Arjun is no exception. The state of Georgia began investigating the fund last year following a random audit contretemps. Now the feds are sniffing around Statim, Arjun's parent company:

The SEC inquiry into Statim comes as Georgia regulators examine the firm. The state began a probe in 2015 after the company failed to submit to a surprise audit, filings show. Georgia Secretary of State Brian Kemp said in July that he had discovered “multiple irregularities" involving Statim and its hedge fund Arjun.

As Bloomberg reports, some of Meyer's original investors have had second thoughts as well. That is despite Arjun's mandatory 10-year lockup period, enforced by a policy of returning only half of the money to those who withdraw early. Which is only natural for so inventive a hedge fund.

SEC Probes Hedge Fund That Promises Investors No Losses [Bloomberg]