Segantii to return capital amid Hong Kong insider dealing probe

Segantii Capital Management has told investors it will hand back their money, weeks after Hong Kong authorities announced a criminal insider dealing case against the hedge fund and its founder Simon Sadler. 

“We have always believed at Segantii that it is a great responsibility and privilege to professionally manage money and we have never taken that lightly,” a spokesperson for the firm said on Thursday.

“We have decided, however, that at this time, it is in the best interests of our investors to return their capital in an orderly manner.” 

Segantii, which was founded by Blackpool Football Club owner Sadler, grew into a dominant player in block trading, a corner of finance in which banks offload chunks of shares privately.

Hong Kong’s Securities and Futures Commission said this month that it was bringing criminal proceedings against Segantii, Sadler and a former Segantii employee, Daniel LaRocca. Segantii has previously said that it intends to “defend itself vigorously” in the case, which relates to trading in shares of retailer Esprit in 2017.

It is unclear whether the hedge fund will shift to operating as a family office, investing Sadler’s funds without managing external capital. Employees were told on Thursday that the decision to return capital to investors may mean the fund would shut down, according to one person close to the firm. Segantii did not immediately comment on this.

“There is a mixture of shock and annoyance,” said the person.

Sadler and LaRocca appeared in court in Hong Kong earlier this month and were released on cash bail with the case adjourned to June 12.

Sadler built Segantii from a small regional hedge fund into one of the biggest block traders in Asia that at its peak managed more than $6bn with offices in Hong Kong, New York and London.

It built relationships with Wall Street’s biggest banks, though Bank of America and Citigroup suspended equity trading in the firm in 2022 because of concerns about its bets on blocks of shares.