Chris Ruffle, who co-managed the best emerging market hedge fund last year according to Hedge Funds Review, plans a new China offering after he parted company with Martin Currie Ltd. today following an investigation into a conflict of interest.
Heartland Capital Management Ltd., in which Ruffle holds a 70 percent stake and Ke Shifeng the remainder, will in early November acquire Martin Currie’s interest in a China joint venture between the companies, Ruffle said by phone from San Francisco. Ruffle, 52, said Ke will join him at the firm that will include Martin Currie’s team of 12 analysts in Shanghai.
Ruffle, who was responsible for co-managing 31 percent of Edinburgh-based Martin Currie’s assets, said he is setting up trading, legal and compliance systems for Heartland so that it’s ready in November “as a fully functioning, fully SEC-licensed fund management company to offer people who want to invest in China.” Martin Currie will retain all its assets in Greater China, except for about $150 million, Ruffle said.
His departure from Martin Currie was agreed to by regulators in London and Washington after an examination of transactions in an unlisted convertible bond issued in 2009 by Ugent Holdings Ltd., a Chinese maker of printer cartridges, Martin Currie said in an e-mailed statement yesterday. Ruffle, in a telephone interview, denied any wrongdoing.
“In light of recommendations made in those reviews, and following extensive dialogues with Chris Ruffle and with our regulators, Martin Currie has concluded that it must now part ways with Chris Ruffle,” said Willie Watt, Martin Currie’s Chief Executive Officer, in the statement.
Martin Currie is losing a manager who spent much of the past two decades building a China business with more than 3 billion pounds ($4.9 billion) in assets managed. London-based Hedge Funds Review chose the Martin Currie China Hedge Fund that Englishman Ruffle co-managed with Ke as the best in emerging markets last year, and London-based HFMWeek selected it as the best fund in the same category in 2009.
Ke will assume Ruffle’s responsibilities, Martin Currie said. The company is also recruiting two new fund managers and a head of research for the region, it said.
Ke declined to comment in a telephone call today.
In April, Martin Currie said in its annual report that the company entered into a transaction that “may have presented a conflict of interest.” The company then said in May it was in talks with the U.S. Securities and Exchange Commission and the U.K. Financial Services Authority and was helping them with their enquiries.
Conflict of Interest
An investment made in 2009 in Ugent by Martin Currie on behalf of the U.S.-listed China Fund that Ruffle co-managed with Ke led to a conflict of interest because the Scottish firm was also investing client money in Ugent’s parent company, the Scotsman reported, without citing a source. The conflict of interest resulted in a $20 million compensation agreement with investors, according to the newspaper’s website.
Martin Currie, which oversaw 10.1 billion pounds of assets as of June 30, down 11 percent from the end of 2010, said it had resolved the issue with the client concerned.
Both investments were “fully discussed within Martin Currie within valuation committees and reported to the board,” Ruffle said today. “I think it was in the best interests of both groups of investors. It was fully disclosed but unfortunately was not captured in the minutes of the board meeting of the fund and that was the problem.”
Based in Shanghai since 2002, Ruffle started working for Martin Currie in 1994, according to the firm’s website. Originally from Bradford in England, Ruffle speaks Chinese fluently and has a penchant for building castles.
In 1992, while living in Taiwan, Ruffle bought sight-unseen for 50,000 pounds the ruins of Dairsie Castle near St. Andrews in Scotland, which he rebuilt. In 2006, he began construction of another castle near Yantai in China’s Shandong province that was completed in 2009. There he founded Treaty Port Vineyards, a winery that began selling its first vintage in May.