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David Swensen is one of the most powerful and influential investors in the world, a man who from his perch at the helm of Yale University’s endowment for more than three decades has just about as much experience investing in hedge funds as anyone. As such, it would take some serious stones to attempt to defraud so wealthy and august an institution and man. But hedge fund managers are not known for lacking in chutzpah, so that’s exactly what Deccan Value Investors allegedly did.

The Securities and Exchange Commission started asking Deccan general questions -- including queries about how it handled Yale’s investment -- last year after the tipster alleged that securities managed on the college’s behalf were sold at prices below the best available in the market…. There’s also a possible conflict of interest, because the whistle-blower alleges some of the securities were bought by other investment pools Deccan manages, potentially enabling the funds to buy the shares at more favorable prices.

That’s just the kind of thing even Jay Clayton would wag an angry finger about, so we can’t imagine how Gary Gensler will take it—especially since Deccan has counted his own alma mater, Penn, among its clients. And it’s a good reminder that if you are (allegedly) going to be doing that kind of thing, it’s best to keep your would-be whistleblowers happy and quiet, because Deccan (allegedly) almost got away with the thing, if it did in fact do the thing in the first place.

Yale has never complained to Deccan about its redemption, one person familiar with the matter said.

SEC Probes Whistle-Blower’s Claims That Hedge Fund Harmed Yale [Bloomberg]


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