With Hugh Dunkerley, who bought Fondinvest last year, facing charges of alleged securities fraud, questions hang over the future of the Paris-based fund of funds.
When two men from Burnham Securities purchased Fondinvest Capital last year it seemed the firm’s founder Charles Soulignac finally had a succession plan in place as he approached his 70th birthday.
In September, Hugh Dunkerley, then a director at Burnham Securities, said he had personally purchased Fondinvest with Dan McClory, at the time a managing partner at the same firm.
The transaction opened new horizons for Fondinvest, which had previously put its fundraising for Fondinvest X, its fifth secondaries fund, on hold. The purchase would help restart fundraising efforts and Dunkerley and McClory’s Rolodexes would open up a new pool of potential LPs, while Soulignac would remain in charge of managing the funds.
Now with the news that Dunkerley has left Fondinvest amid charges of tribal bond fraud, as Secondaries Investor reported this week, the future of Fondinvest seems uncertain again.
You can read about the complex alleged scheme at Secondaries Investor, but here’s a quick rundown:
A complaint by the Securities and Exchange Commission from 11 May claims Dunkerley and six others took part in a fraudulent scheme to obtain control of two registered advisors – Hughes Capital Management and Atlantic Asset Management – and persuade their clients to invest in Native American tribal bonds, which are typically issued by tribes to finance economic projects.
Fondinvest is not named in the SEC filing, but the case raises important questions for the firm.
One is whether Dunkerley used fraudulent money to buy Fondinvest. Nothing has been established on that front, but the SEC complaint indicates that he allegedly purchased a European fund of funds with the money; it is not clear whether this was indeed the French firm.
It also remains unknown who, if anyone, has taken over Dunkerley’s stake in the company, or whether McClory is still a shareholder. McClory and Dunkerley owned 100 percent of the company’s share capital. McClory has since taken a job as the head of China and West Coast equity capital markets at Bonwick Capital Partners, according to his LinkedIn profile. There is no suggestion he knew of any wrongdoing.
There’s also the inevitable question related to fundraising. Although it’s unclear how much the firm had raised for Fondinvest X when the news of the lawsuit emerged in early May, this development certainly throws a spanner in the works: LPs will be wary of committing to a manager whose owner is under investigation.
Unfortunately for Fondinvest, it will once again have to address the issue of succession as well as any reputational fallout from the investigation.
Fondinvest and McClory did not return requests for comment. Dunkerley declined to comment.
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