Segantii Can Liquidate 97% of $4.77B Portfolio in Five Days Amid Charges

Key Takeaway

• Segantii Capital Management, managing $4.77 billion, can liquidate 97% of its portfolio within five days, ensuring high liquidity.
• The firm faces insider trading charges in Hong Kong, potentially impacting its investment strategy and leading to a fund closure.
• Segantii will return capital to investors amid concerns over redemption requests, affecting 140 employees across Hong Kong, New York, and London.

Segantii's Liquidity Profile

Simon Sadler’s Segantii Capital Management, which recently decided to return capital to investors amid an insider trading charge, has a highly liquid portfolio. According to an investor update for April seen by Bloomberg, the Segantii Asia-Pacific Equity Multi-Strategy Fund, managing $4.77 billion in assets, can liquidate 84% of its portfolio within a day and 97% within five days. This liquidity profile is crucial for investors who want to avoid being stuck in hard-to-sell assets. Segantii is known for its relative value and capital markets trades, focusing on Asia-Pacific equities and equity-linked securities but also trading globally. The fund's top holding of US securities at the end of March was a $395 million bearish wager on an exchange-traded fund linked to the Nasdaq 100 index.

Insider Trading Charges

Hong Kong’s Securities and Futures Commission charged Segantii, one of its former traders, and Sadler with insider trading tied to a block trade in 2017. The firm stated that the legal action might adversely impact its ability to implement its investment strategy effectively. "Segantii intends to defend itself vigorously against the charge," the company said earlier this month. The case is moving to a higher Hong Kong court that can hand out longer sentences for convictions. The District Court can impose sentences of up to seven years in prison, compared to two to three years at the lower court. Sadler and former trader Daniel La Rocca appeared in the Eastern Magistrates’ Court on May 2 without making a plea, with the next hearing scheduled for June.

Fund Closure and Redemptions

Segantii announced it would shut down and return capital to investors after the insider trading charge sparked concerns about significant redemption requests. Sadler and CEO Kurt Ersoy informed staff that the fund would close in the best interests of investors. The firm is suspending redemptions to return cash over time. "It is in the best interests of our investors to return their capital in an orderly manner," a spokesperson for Segantii said. The closure affects about 140 employees in Hong Kong, New York, and London. The firm had $4.77 billion in assets as of the end of April and was up 2.9% through April this year. Since its inception, the fund returned more than 12% annually, outperforming the S&P 500 Total Return Index and a Eurekahedge Asia gauge.

Management Quotes

• Segantii Capital Management:

  "Segantii intends to defend itself vigorously against the charge."