By contrast, Och has put some distance -- literally -- between his New York fund and family office, which is based 30 miles north of the city in White Plains.
SEC’s View
Spokesmen for Eton Park, Och-Ziff and Tudor declined to comment on the potential for conflicts between the two sides.
Regulators are taking note. The U.S. Securities and Exchange Commission is trying to assess risks associated with the growth of family offices.
“Diversifying from the fund is not a problem, but we want to make sure that if there’s an overlap of investments, it’s disclosed in a timely manner to investors,” said Jennifer Duggins, who co-runs the SEC’s private funds unit.
Over at Pershing, Ackman disclosed his holding in Sprout on Aug. 26, six days after Valeant said it was buying the company. In a report to clients, Ackman said the holding marked only the second time he’d invested in a private firm that was subsequently bought by a company in which Pershing has a stake. (Pershing wouldn’t have invested in Sprout because it only takes stakes in publicly-traded securities.)
Ackman’s Rules
Ackman also said in the report that his hedge fund has strict policies governing potential conflicts. Employees aren’t allowed to invest in publicly traded equity or debt securities other than U.S. Treasuries, money markets and municipal bonds. Nearly all employees have most of their liquid net worth tied up in Pershing funds, though they aren’t encouraged to put 100 percent in, Ackman said.
“Employees that are ‘overinvested’ in the funds may lose the dispassionate economic rationality that is essential for sound investment judgment, particularly in times of market stress,” Ackman wrote.
A spokesman for Ackman declined to comment for this story.