Discus May Lose $407 Million on Sentinel Collapse

Date: Wednesday, August 22, 2007
Author: David Clarke, Bloomberg

Aug. 22 (Bloomberg) -- Capital Fund Management, a Paris- based hedge-fund manager, said its Discus Master Fund could lose as much as 27 percent of its assets, or $407 million, after the bankruptcy of cash-management firm Sentinel Management Group Inc.

Chief Executive Officer Jean-Pierre Aguilar said in an interview today that the company's Stratus Fund Ltd. also could lose as much as 10 percent of its $2.2 billion of assets as a result of a holding in Discus. Stratus invests in a range of funds managed by Capital.

``We are fighting to recover the money,'' Aguilar said. The company oversees about $4 billion in total.

The U.S. Securities and Exchange Commission has accused bankrupt Northbrook, Illinois-based Sentinel of lying to investors and misappropriating their assets by moving at least $460 million from clients' accounts into its own, and misusing the holdings as collateral to obtain credit.

The Discus fund bets on the prospects for futures and currencies, Aguilar said. Stratus has about 40 percent of its assets in Discus, he added.

Sentinel froze client withdrawals on Aug. 14, citing credit market volatility. The company's Chapter 11 bankruptcy filing, which Sentinel said will allow it to restructure its debt, listed both assets and liabilities of more than $100 million.

To contact the reporter for this story: David Clarke in Edinburgh at dclarke3@bloomberg.net .