Reply #115: how many more "Bayou Funds" are out there? [View All]

[UpInArms]

from your link:

Investors in Wood River's funds apparently didn't know much about Whittier, either. The ex-stock analyst at investment bank Donaldson, Lufkin & Jenrette presented himself as a savvy stock trader overseeing hundreds of millions of dollars for investors. Marketing materials for his flagship fund trumpet 25% returns in the first eight months of this year, a period when the stock market was basically flat.

WARNING SIGNS. But some investors got nervous and tried -- unsuccessfully -- to get their money back late last month when Whittier's big bet on an obscure Silicon Valley stock slumped badly, say investors' lawyers. The firm stopped answering its phone. Last week, Wood River's offices in downtown Ketchum were locked and apparently unoccupied. FedEx packages piled up outside next to strollers and a red wagon left by Whittier's two young children.

Wood River is now the subject of a preliminary investigation by the Securities & Exchange Commission -- the latest hedge-fund scandal that is sure to intensify calls for greater government oversight of these lightly regulated investment pools. Only two weeks ago the founders of collapsed Bayou Management, a hedge fund in Stamford, Conn., pled guilty to criminal fraud.

As in the Bayou affair, Wood River presented red flags that careful investors should have noticed. The firms Wood River's promoters named as its outside auditor and bookkeeper, for example, say flatly that they didn't provide those services to the hedge fund. Morgan Stanley (MWD ), listed in April as one of the hedge fund's two prime brokers, in fact was not, according to a person familiar with the matter.

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