BVI Offshore Business: Grey Area

On March 19 Weavering Capital, a $639m (£440m) London hedge fund, put into liquidation its main fund - Weavering Macro Fixed Income fund in the Cayman Islands. Weavering froze the fund last week, after it was discovered that it was a $637m derivatives trade with an offshore company controlled by the fund’s founder and chief executive.

PwC, appointed to investigate the position as the liquidators of the fund, said there was “considerable uncertainty” over the $637m value listed for the fund’s main asset not pledged to lenders, a derivative transaction with Weavering Capital Fund Ltd in the British Virgin Islands.

PwC said it had been told the BVI company’s assets were $10m of cash and $40m of private equity positions, although these have not been substantiated. It was unclear who the directors of the BVI company are, but PwC said that Mr Peterson had told them he controlled it.

Matthew Wilde, partner and head of the hedge fund resctructuring team at PwC, said that he could not comment on who at Weavering put the trade in place, or for what reason. The problem with the fund was discovered after investors tried to withdraw $223m, of which just $90 m has been paid so far. In addition to the outstanding $133m payments, the fund reported assets in the amount of $506m at the end of February this year - down from $535m in January.

Weavering is one of the oldest hedge fund managers, running small funds including one in Sweden, and set up in 1998 by Magnus Peterson - former head of trading at Swedish bank SEB. For the past years it had returns of 10-12%.