The Boston Globe reports that Michael Trotsky, the pension board’s executive director, said the raids are part of an insider-trading investigation. He told trustees in a letter that some retirement money for state employees was invested with Diamondback Capital Management of Stamford and Level Global Investors of Greenwich, via funds-of-funds.
The state pension fund has nearly 8% of its $45.9 billion in assets invested in hedge funds, with $48.4 million of that at Level Global and $17.2 million at Diamondback Capital. Both firms said they are cooperating with the investigation.
In an interview with the Globe, Trotsky, a former hedge fund manager, said he has no immediate concerns about losing money in the hedge funds. “We’re keeping our antennas up,’’ he said. “If we ever sniff that this is going south, we’re going to protect ourselves.’’
The FBI raids are the latest elements a broad federal probe of insider trading at hedge funds that erupted with last year’s Galleon Group scandal. There have been 23 arrests linked to that New York hedge fund, on charges of illegally using inside information to profit from trades on several stocks, according to the news report.The Globe said Bloomberg News has reported that Boston investment firm Wellington Management Co. and SAC Capital Advisors have also received inquiries this week. Loch Capital Management of Boston was also raided this week. Janus Capital Group disclosed in an SEC filing that it has received an inquiry and is cooperating.
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