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Need To Know

Report: TPG Hedge Fund Subpoenaed

The U.S. Securities and Exchange Commission subpoenaed TPG-Axon Capital Management, a hedge fund sponsored by the buyout shop TPG Capital, as part of a wide-ranging inquiry into possible insider trading violations, the Wall Street Journal reported Nov. 20. TPG-Axon was one of several hedge funds from which the SEC is seeking information about deal-related communications, according to the Journal.

Though TPG-Axon was the only hedge fund mentioned that is sponsored by a buyout fund, it will be interesting to see if others are ensnared given the breadth and scope of the investigation, which involves the SEC, the New York Attorney General’s office and the FBI. For a hedge fund trader under the same umbrella as a buyout shop, the temptation to seek tips from the buyout side of the firm must be enticing.

Several buyout shops house their own hedge fund units, including Bain Capital, The Blackstone Group and Kohlberg Kravis Roberts & Co. Blackstone Comes Up Short

The Blackstone Group failed to takeover power producer Dynegy Inc. after a protracted battle with the company’s prominent shareholders. The New York-based firm repeatedly insisted its $4.50-per-share offer was its best and final, but caved with a last minute increase to $5.00. But even with the sweetened $602 million bid, Blackstone failed to sway enough shareholders.

Dynegy’s two largest shareholders, Carl Icahn and Seneca Capital, had fiercely resisted Blackstone’s bid, arguing it was too low.

Dynegy will now likely seek another buyer, sell assets or restructure, Reuters, a sister newswire service of Buyouts, reported. Buyout shops that compete with Blackstone could follow up with their own bids, a source told Reuters in the same report.

Blackstone, in a Nov. 23 statement, wished the company the best in its effort to find a new buyer.

EU Approves New Regs

On Nov. 11, the European Parliament approved the Alternative Investment Fund Managers Directive, a new regulatory regime that will affect how U.S.-based buyout fund managers solicit investors in the European Union.

The big question with the Directive was how hard it would be for fund managers not based in the European Union to market their funds to investors in EU member states, as earlier versions of the legislation would have made it virtually impossible. Generally speaking, non-EU fund managers will be allowed to market their funds so long as they comply with additional regulatory requirements pertaining to transparency and asset stripping, among others. The new regulations begin in 2013.

In the longer term, U.S. fund managers may need to register with, and be supervised by, an EU financial services regulator in order to market funds to EU investors, according to attorneys at Kirkland & Ellis.