ASIC’s two-year wait before calling in AFP to raid Regal Funds Management

After plotting its investigation for almost two years, ASIC called in the AFP to raid Regal Funds Management

Phil King, chief investment officer of Regal Funds Management. Picture: Britta Campion

The corporate regulator spent almost two years plotting its investigation into Regal Funds Management before it called in the Australian Federal Police to raid the high-profile hedge fund’s office in Sydney.

Freedom of information documents obtained by The Australian reveal the investigation — the allegations of which remain a mystery — began on March 27, 2018, long before the Australian Securities & Investments Commission, chaired by James Shipton, called in the AFP.

The Federal Police raided Regal’s office in Sydney’s Gateway building in late November last year and was overseen by a small party from ASIC, with one source familiar with the operation saying: “They were pretty keen to get in there.”

According to the freedom of information documents, the AFP committed a team of two to five members and was expected to wind up its involvement in the Regal investigation by April 30.

But ASIC confirmed to The Australian on Thursday that its investigation was ongoing, despite Regal chief investment officer Phil King saying he was yet to receive any “significant update” from the regulator since the raid.

“Unfortunately (I am) unable to provide any comment at this stage, other than to confirm that ASIC’s investigation is ongoing. And as you’d know, ASIC doesn’t comment on investigations,” an ASIC spokesman said.

Mr King told The Australian that Regal, which manages $2bn for wealthy investors, had answered a series of questions from ASIC and looked forward to clearing its name.

“We don’t think we have done anything wrong,” Mr King said.

“There has been no significant update since the search warrant (was executed). We hope the answers that we have supplied to ASIC’s questions have satisfied them and there will be no further action.”

The morning after the raid on November 27, Harvey Kalman, director of Equity Trustees, the responsible entity for Regal, said ASIC’s investigation did not ­affect its ability to provide asset management services to its ­clients.

“As an active participant in Australian equity markets, Regal is subject to scrutiny from regulatory bodies from time to time,” Mr Kalman wrote to investors.

“Regal’s responsibility to its clients is paramount and it takes its obligations to comply with all laws and regulations very seriously. Regal is co-operating fully with the investigation.”

It comes amid a turbulent time for the high-performance hedge fund. In the March quarter, the Regal Australian Long Short ­Equity Fund posted a negative performance of 35.2 per cent, making it the worst long-short fund ranked by Mercer. But over five years, the fund is in top spot among its peers with a 9.9 per cent annual performance, when tracking for excess monthly returns is included. The long-short fund is just one strategy within RF1.

In April, Mr King said he expected the bear market had a way to go and urged investors to be ­patient. “There’ll be a lot of false dawns, a lot of sucker rallies, such as the one we are seeing now,” he said.