Fallen Hedge Fund’s Head Among Investors Getting PPP Relief
Jacob Gottlieb, is among Wall Street money managers who tapped the government’s $669 billion emergency program.
(Bloomberg) -- Jacob Gottlieb, whose $8 billion hedge fund shut amid an insider trading scandal, is among Wall Street money managers who tapped the government’s $669 billion emergency program designed to help small businesses survive the coronavirus pandemic, according to federal data released Monday.
Gottlieb, whose Visium Asset Management settled a regulatory probe two years ago, received a $150,000 to $350,000 loan for his new shop, Altium Capital Management, under the Paycheck Protection Program, according to the data posted online. He set up New York-based Altium two years ago, according to his LinkedIn profile. It’s unclear whether the firm has outside clients.
The finance and insurance industry received $12.2 billion in loans from the small business program, according to the U.S. Small Business Administration. While many of those firms are technically small businesses -- employing 500 people or fewer -- they weren’t forced to shut by stay-at-home orders, unlike barber shops, florists and mom-and-pop retailers whose revenues evaporated. Financial markets have remained open during the lockdowns, allowing Wall street firms to keep earning fees from clients.
The government in late April deemed hedge funds ineligible for the relief program, saying that because they’re primarily engaged in speculative investments they shouldn’t be entitled to PPP loans. Private equity firms were also barred from the package, though companies they invest in found ways to qualify.
Data for almost 4.9 million loans, released Monday by the SBA, detailed a number of noteworthy Wall Street recipients. The program, passed hurriedly by Congress in March, was dogged by controversy as some publicly traded firms tapped it. Many returned PPP loans after their borrowing drew criticism.
Visium in 2018 agreed to pay more than $10 Million, settling U.S. Securities and Exchange Commission allegations that it illegally profited from misconduct by former traders. Two of the traders served time over a scheme involving phony broker quotes and mismarked bond prices, while a former partner accused of obtaining inside information took his own life shortly after being charged by the government.
Gottlieb wasn’t accused of wrongdoing and his firm settled with the SEC without admitting or denying the allegations.
Reached by Bloomberg, Gottlieb said he would have someone respond to questions about the loan and hung up. There was no response to subsequent messages.
Hedge fund Marcato Capital Management, which in December announced plans to wind down, received a loan in the same range as Altium, according to the data released by the SBA. Before assets sunk to a few hundred million dollars, the firm founded by Mick McGuire had managed about $3 billion at its peak.
A representative for San Francisco-based Marcato didn’t immediately provide a comment.
Several other money managers are listed as receiving SBA loans, some of whom say the information is wrong. The list includes:
- Cartica Management, which specializes in emerging markets and managed about $1.2 billion in regulatory assets at the end of 2019, got at least $350,000. “Cartica Management does not intend to seek forgiveness of the loan proceeds as permitted under the CARES Act and intends to repay the loan in full,” a spokesperson for the Washington-based firm said.
- Metacapital Management, run by Deepak Narula, initially received $350,000 to $1 million. The firm returned the cash, including interest, within a couple of weeks once the guidance came out barring hedge funds, according to a person with knowledge of the matter, asking not to be identified because the information isn’t public. Metacapital ran almost $1.1 billion as of March but now oversees less than that. Narula declined to comment.
- Inferent Capital, a quant firm founded by Bridgewater Associates’ former head of trading Jose Marques, got $150,000 to $350,000. Marques declined to comment.
- NorthCoast Asset Management received $350,000 to $1 million after its application was approved on April 29, the government said. Chief Executive Officer Daniel J. Kraninger didn’t respond to messages seeking comment.
- Advent Capital Management, the $8.5 billion firm run by Tracy Maitland, was approved on April 15 for a loan of $1 million to $2 million, according to the government, though the firm says it never got any relief. “Advent Capital Management explored but never completed an application, and as such, did not receive any pandemic aid,” said Darius Athill, a spokesperson for the New York-based firm. Advent is looking into why it was listed as receiving money, according to another person.
- Weiss Multi-Strategy Advisers got $2 million to $5 million, according to the government. But a spokesman for the firm said it also didn’t get any funds. “Like many small businesses, Weiss looked into applying for a Payment Protection Program loan at a very early stage, when guidelines around eligibility were still being assessed and amidst internal deliberations,” spokesman Paul Merchan said in an emailed statement. “On conclusion of those deliberations, we rescinded our incomplete application.”
- Highland Capital Management Fund Advisors received between $150,000 and $350,000. The company is affiliated with Highland Capital Management, a bankrupt Dallas-based investment management firm co-founded by James Dondero. Highland Capital Management Fund Advisors believes it sought and received funding in compliance with the program’s requirements, according to a company representative.
- Canaras Capital Management, an investment firm that manages collateralized loan obligations, got a loan in the range of $350,000 to $1 million, the SBA data shows. A representative for Canaras declined to comment.
- Par-Four Investment Management, another firm that manages CLOs, received between $150,000 and $350,000. The company sought the loan because of market uncertainties tied to Covid-19, according to a Par-Four representative. Par-Four ended up retaining all its employees and has informed its bank that it plans to repay the PPP loan in full because markets stabilized, the representative said.
- An affiliate of Angel Oak Capital got a loan between $1 million and $2 million. Angel Oak Companies is strategically integrated but operationally independent, according to Angel Oak Chief Operating Officer David Silvera. Silvera said the government aid didn’t benefit Angel Oak’s asset management business and that 60 employees were hired back as a result of the loans. He said the company hopes to add at least 60 more employees by the end of this month.
- ShoreBridge Capital Partners, a firm that helped billionaire Steven Cohen raise money from hedge fund investors after a regulatory ban on him managing other people’s assets was lifted, got approval for a $150,000 to $350,000 loan on April 13. ShoreBridge founder Douglas Blagdon didn’t return messages seeking comment.
©2020 Bloomberg L.P.