Former BlackRock fund manager Mark Lyttleton was arrested April 30 as part of an insider trading probe by the U.K. Financial Conduct Authority, two people familiar with the matter said.Lyttleton was detained along with an unidentified woman in west London, said one of the people, both of whom declined to be identified because the matter isn’t public. An FCA spokesman declined to comment on the investigation. Lyttleton couldn’t be reached for comment.
The FCA said in a May 3 statement that a 41-year-old man and a 37-year-old woman were arrested when the City of London Police executed a search warrant. The U.K.’s financial watchdog is seeking to crack down on insider trading by employees at London financial companies after having previously targeted lower-profile individuals. The watchdog is currently prosecuting seven other people for insider dealing, which carries a maximum sentence of seven years in prison upon conviction.
“The FCA has informed us that the allegations relate to actions carried out for personal gain, while off our premises, and that neither BlackRock, nor any other employee, is under investigation,” Brian Beades, a spokesman for New York-based BlackRock, said in an emailed statement. The firm is cooperating in the investigation, Beades said.
Market Abuse
The FCA on April 1 took over the market abuse and consumer finance enforcement duties from the Financial Services Authority, which was phased out by lawmakers who blamed it for failing to prevent the financial crisis in 2008. Sky News reported the arrest on Monday.
Lyttleton, who was based in BlackRock’s London office, ran funds including BlackRock UK Dynamic Fund, with 558 million pounds ($855 million) in assets, and BlackRock UK Absolute Alpha Fund with 383 million pounds in assets, until March. He left BlackRock March 28, according to one of the people. Lyttleton had worked at Merrill Lynch’s investment unit, which was acquired by BlackRock in 2006.
The U.K. Absolute Alpha Fund, which bets on stocks falling instead of rising, rose 1.5 percent in 2008, beating 98 percent of its peers, according to data compiled by Bloomberg. By August 2009, the fund had as much as 1.6 billion pounds of assets.
Performance dropped following the financial crisis as Lyttleton bet that rising taxes, high unemployment and cuts in government spending would constrain growth, he said in an August 2009 interview. While his view on the U.K. economy was correct, the stock market rallied, pushing his fund into the bottom 5 percent of peers in 2009 and 2010.
Leaving BlackRock
The fund has been in the bottom 2 percent of its peer group in the last three years and declined 5.6 percent in the past year, putting it in the bottom 1 percent of its competitor funds, according to Bloomberg data.
Lyttleton’s U.K. Dynamic Fund, which climbed 12 percent in the last year, was in the bottom 20 percent of funds in its peer group, Bloomberg data show. The fund is now managed by Nick Little, a colleague on BlackRock’s U.K. equity team.
The arrests last month were in conjunction with searches of homes and offices in Zug, Switzerland. Judith Aklin, a spokeswoman for police in Zug, said the searches there were conducted April 30 after authorities received a request for legal assistance from the U.K. She declined to comment further.
Low corporate tax rates have helped attract almost 30,000 companies, including Glencore International and Xstrata to Zug, as well as hedge funds such as Stone Milliner Asset Management, Tiberius Asset Management and Argentiere Capital.
A Credit Suisse study from 2011 declared Zug the most attractive Swiss canton for doing business. It included factors such as transportation and taxation.
-- Bloomberg News
