Hedge Fund Reader : Bayou Fund bites the dust

Comments

August 28, 2005

Bayou Fund bites the dust

Bayou Group, a Stamford, Connecticut-based hedge fund has shut shop and is presumed to be absconding. Bayou, founded by Mr. Samuel Israel III, ran four hedge funds Bayou Superfund LLC, Bayou No Leverage Fund LLC, Bayou Affiliates Fund LLC and Bayou Accredited Fund LLC. Mr. Israel was a short-term stock trader and claimed to have garnered a return of approximately 200 per cent a month. He earned a commission of an estimated 1 per cent to 3 per cent a month on the dealings. The adopted a strategy whereby he would be wagering approximately 50 per cent of the portfolio on falling stocks and the remaining on shares he expected to rise, the presentation said. The U.S. Securities and Exchange Commission, Connecticut Department of Banking, and the state regulators are on a look out for any possible wrongdoing. However here have been various reports about the absence of Mr. Israel, the funds newsletter mentions that it has not invested since June due to rising stock prices and may start afresh in July, while articles do mention about a disruption in his personal life and wanted a break. Although the Fund released a statement on August 11 promised to refund investors money, but Mr. Israel has vanished since then. Newsday.com Reports:

"This potential fraud, now under active investigation by the state and other authorities, may indicate the need for stronger oversight and active regulation of the hedge fund industry," Richard Blumenthal, Connecticut attorney general, said in a statement. The SEC has initiated its own inquiry, said a person familiar with the matter.