The UK’s Serious Fraud Office (SFO) has launched a criminal investigation into London-based asset management company Dynamic Decisions Capital Management.

The SFO issued a statement asking for information "that might help with enquiries" into Dynamic Decisions and a Cayman-domiciled hedge fund, Dynamic Decisions Growth Premium Master Fund.

DD Growth Premium Master Fund was incorporated in the Cayman Islands but its investment manager Dynamic Decisions Capital Management handled all its operations, an English incorporated entity authorised by the UK Financial Services Authority (FSA). The main principle of the fund, Alberto Micalizzi, is also registered with the FSA.

The Cayman Grand Court put the fund into administration earlier this year. Grant Thornton's Hugh Dickson and Stephen Akers were appointed as official liquidators with a mandate to investigate the fund's affairs.

"The declared investment objective of the master fund was to seek to achieve absolute returns for investors by adopting a highly liquid strategy of investing in long/short pairs in US and European equities with the focus on large capitalisation entities,” a statement issued by Grant Thornton in May said.

“The unaudited NAV [net asset value] of the master fund on December 31, 2008 indicated a value of $550 million. However, a number of allegations have been made as to the remaining asset value and the nature of the assets held and the master fund has been unable to pay a number of large redemption requests," it continued

Complaints about Dynamic Decisions had been made to both the SFO and the UK's FSA that then formally referred the issue to the SFO.

It is understood that investors who claim to have lost money or have been disadvantaged by the management of the fund made the complaints.

According to another statement issued by Grant Thornton, the liquidators' investigations into the financial position of the fund and its affairs put emphasis on securing value for the creditors and investors.  “A key potential asset of the fund are corporate bonds purchased by the fund in late 2008 and which formed a major proportion of the declared NAV of the fund immediately prior to its liquidation,” said the statement.  

“Allegations have been made that these bonds not only fell outside the parameters of the mandated investment strategy of the fund but that the bonds had no real value. Interest has been expressed by an interested party in acquiring the bonds at a substantial proportion of face value, but negotiations have not completed as at the date of this release,” is continued.

Other potential assets include largely illiquid or thinly traded bonds, warrants and shares.  Efforts to realise these are continuing, according to Grant Thornton. The liquidators are also evaluating a number of areas that may give rise to third party liability.

The official liquidators are co-ordinating their actions with the liquidators of the DD Growth Premium Fund and DD Growth 2X Fund which both acted as direct and indirect feeder funds to the master fund

Dynamic Decisions' founder Alberto Micalizzi did not return a call from Hedge Funds Review seeking comment on the investigation.

The SFO is currently investigating another UK-based hedge fund manager, Weavering Capital, for alleged fraud connected with a Cayman-domiciled fund. That investigation began in May 2009 after Weavering went into administration in March.

However no hedge fund managers have ever been prosecuted by the SFO.