Fund Timers Reform with New Hedge Fund

Following the mutual fund market-timing scandal, a lot of brokers and hedge funds - especially those implicated - have been assiduously staying away from strategies that involve mutual funds, but some are back in the game. One hedge fund market timer has set up shop under a new name and is back in the business of using mutual funds as part of a hedge fund strategy.

Mark Arnold, managing member of Kismet Capital Advisors, once managed a $100 million market-timing hedge fund called Atlantique Capital Advisors, according to TheStreet.com. AG Edwards recently got in hot water over market-timing trading for hedge funds, including Atlantique.

Now, Kismet has a new hedge fund called Corneille Fund, managed by Frederick O'Meally, who had been investigated by regulators for market-timing activity while he was a broker with Prudential Financial. O'Meally is now appealing to some of his former brokerage clients with a strategy that invests in mutual funds, derivatives and futures in an international arbitrage scheme that does not jump in and out of the funds. Instead, it "has profiled a group of international mutual funds, which it intends to hold perpetually."

The tiny fund, which has netted less than $10 million from investors, is noteworthy primarily because of the storied history of its managers.