Boss of hedge fund Weavering battles fraud charges in London court
Magnus Peterson, battling fraud charges after his $600 million Weavering hedge fund collapsed during the financial crisis, told a court on Friday he could not remember which investors he had warned about his fund’s use of complex financial instruments.
During a trial that has given a rare glimpse into the hedge fund industry before the credit crunch triggered greater regulation and supervision, Peterson said he told investors about the fund’s use of riskier derivatives “on occasions”, but said he could not recall which investors.
“I did on occasions,” he said. “With hindsight, I should have brought more attention to it.”
Peterson has pleaded not guilty to 16 charges relating to the collapse of his Cayman Islands-based Weavering Macro Fixed Income fund, which imploded when people tried to withdraw money at the height of the credit crisis.
Peterson had marketed the fund as a low-risk, liquid investment opportunity that invested in financial instruments traded on a public exchange.
However, when the fund started to underperform, Peterson is alleged to have bolstered its stated — rather than actual — performance using less transparent “over-the-counter” derivatives trades directly with another fund he owned and controlled, Weavering Capital Fund (WCF) in the British Virgin Islands.
Peterson told Southwark Crown Court earlier in the week he had regularly informed the fund’s administrators of its size but had not kept records of the meetings because he was “not very good at paperwork”.
When asked by the prosecution to explain why he had forged a signature, he replied “I felt it was urgent. Not the smartest thing to do, I agree”.
Since the financial crisis, regulators across the world have brought in a range of new rules to help prevent the excessive risk-taking that led to the financial services meltdown of 2007-2009.
For funds, this has resulted in a renewed focus on fees, transparency and remuneration in an effort to protect investors, with an overhaul of European hedge fund rules.
The court case is due to resume on Monday.