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June 22, 2016  

LP Exits Cloud Visium-AllianceBernstein Deal

A plan by Visium Asset Management to rescue its multi-strategy hedge fund by handing it off to AllianceBernstein faces increasingly long odds.

Following the arrests of three Visium employees on insider-trading charges last week, founder Jacob Gottlieb told investors he planned to liquidate all but one of the firm’s vehicles: Visium Global, which had $3 billion as of the first quarter. That fund, which has produced an 18.4% annualized return since 2009, would be taken over by AllianceBernstein — assuming enough of the fund’s investors agreed to the transfer.

Now comes word that two of the fund’s larger investors — the wealth-management divisions of Citigroup and Lyxor Asset Management — already have signaled their intentions to redeem. It’s unclear how much capital the clients of Citi and Lyxor have invested in the fund. What’s known is that a disproportionate number of Visium’s clients were from private-banking and wealth-management platforms, which are typically risk-averse.

A source said Gottlieb and AllianceBernstein executives continue to discuss the exact terms of their agreement, under which the fund’s assets and investment team would be absorbed by the asset-management giant. Gottlieb himself wouldn’t join AllianceBernstein.

For now, Visium Global is all that remains of the New York fund operator, which started the year with $7 billion under management and an enviable track record. On June 17, Gottlieb told investors he would immediately unwind the firm’s four other funds — including the flagship Visium Balanced, a healthcare-stock vehicle Gottlieb personally managed.

Visium’s troubles began in April, when Gottlieb disclosed the firm was under investigation for suspect trading and asset-valuation practices. Then, on June 15, federal prosecutors charged long-time portfolio manager Sanjay Valvani with trading on insider information about pending FDA action on generic-drug applications. Two other Visium staffers, Stefan Lumiere and Chris Plaford, were charged with inflating the values of assets in a bond fund they managed.

On June 20, Valvani was found dead in his Brooklyn home, an apparent suicide.