(Bloomberg) -- Ten miles south of downtown Atlanta, in an anonymous business center overlooking the airport, sits the headquarters of what, on paper, is a hedge-fund powerhouse.
The numbers coming out of the part-time office at One Hartsfield Centre are remarkable: annual returns of 13 percent, 24 percent, even 91 percent since 2013.
Clients aren’t quite sure how it’s done. And Joseph A. Meyer Jr., the man behind the obscure hedge fund, Arjun LP, is keeping his cards close. He says only that he employs a computerized system of his own design but invests most of his clients’ money in safe Treasury bonds.
Meyer is so confident in his approach that he offers an extraordinary guarantee: With Arjun, you will never lose money. His price of admission is steep, however. Investors must hand over their cash for a decade. If they exit early, Meyer keeps half the principal.
“I’ve got a spreadsheet that did the calculations,” Meyer, 49, says of his system. “And then I just got coders to code it, so that the computer’s coming up with it, ’cause I can’t, I couldn’t, manually do something like that.”
A lot of things about Arjun might seem peculiar. Since 2013, for instance, it has employed no fewer than three different auditing firms. Brian Kemp, Georgia’s secretary of state, says his securities division has discovered “multiple irregularities” involving Arjun and its parent company, Statim Holdings Inc.
“Based on these irregularities, the division’s enforcement personnel immediately launched a formal investigation into potential violations of the Georgia Securities Act,” Kemp said in a statement to Bloomberg on July 11. “The investigation is ongoing at this time.”
Meyer’s legal counsel, Parth Munshi, says it’s all a misunderstanding, in particular because Statim believed it wasn’t required to submit to a surprise audit. He says Statim has retained a firm to conduct one.
Near the Top
Arjun might never have gained much attention at all except for one thing: The numbers Meyer has been reporting have placed him, quite improbably, near the top of the hedge-fund game. In many ways, he’s a monument to the golden age of hedge funds. For folks hoping to beat the markets, investing in one of these private pools of money is a tantalizing prospect.
It’s also one that can take a bit of faith. David Recknagel, a sales executive in Detroit, met Meyer when the money manager was doing consulting work. Recknagel says he invested in Arjun after losing confidence in big banks and money-management companies. He concedes he’s not sure how Meyer does what he does.
“I understand it in general, but I probably don’t understand it completely,” Recknagel says.
Meyer’s numbers certainly are enticing. Relying on data reported to Bloomberg LP, Bloomberg News ranked Arjun eighth in 2015 among hedge funds with between $250 million and $1 billion in assets. BarclayHedge, which also tracks hedge funds, has bestowed no fewer than 17 awards on Arjun, according to Meyer’s website. Arjun was named one of five top global macro funds of 2015 in HedgePo’s Investors Choice Awards.
Behind Meyer’s figures is a puzzle: In January 2015, BarclayHedge data showed Arjun’s main investment class had $115 million under management. A year later, data compiled by Bloomberg showed the total was $338 million. This past March, in a filing with the state of Georgia, Statim said Arjun managed $39 million in all. Funds with more than $100 million must file similar information with the Securities and Exchange Commission. As of July 25, no such filing appeared on the SEC’s website.
Ty Trippet, a spokesman for Bloomberg LP, said of the company’s ranking methodology: “Bloomberg’s hedge-fund rankings are based on a combination of Bloomberg data, information from the hedge fund, investors and other sources.”
Sol Waksman, president of BarclayHedge, pointed to a BarclayHedge disclosure that says performance and valuation information “has been supplied by the funds or their agents and although believed to be reliable, has not been independently verified and cannot be guaranteed.” Ryan Kalish, co-founder of HedgePo, now known as Allocator, declined to comment.
Asked during an April interview to reconcile the numbers, Meyer said that Bloomberg’s $338 million figure was right and that it included money from a family account as well as from outside investors. In an interview this month, Munshi and Meyer both said the company doesn’t provide figures on the firm’s asset management “to anyone.”
Regulators require hedge funds to give investors proof that their assets exist, either by contracting an outside firm to conduct a surprise audit or by having an independent accountant send them audited financial statements. Statim does neither.
Custody of Assets
Asked why in a July 12 phone interview, Munshi said the firm mistakenly believed it didn’t have possession, or “custody,” of the assets. In a later interview, he said the firm indeed had custody but thought it could sidestep the rules because of “the method and the way that we had custody through required custodians.”
Sitting in his modest office, Meyer hardly comes across as a hedge-fund highflier. A graduate of Duke University in Durham, North Carolina, with a business degree from the University of North Carolina at Chapel Hill, he said he started his career as a consultant and analyst, first at First Union Corp. and later Andersen Consulting. He says he started Statim in 1993 to manage money for relatives. Looking to expand, he opened Arjun in 2007.
Meyer says his secret sauce is the proprietary program running on his computer that automatically sends orders to Arjun’s prime broker. He says he tweaks his program every 16 months or so.
“All it does is look at the last trade and calculate trades that would be equivalent of, ‘What if this security increases 50 percent in value in the next three seconds,”’ Meyer says of his program.
Jeans and Beer
Jeff Roberts, who runs a real-estate appraisal company in Asheville, North Carolina, says he met Meyer in 1989, while the two were at First Union. They became friends after Meyer, wearing jeans and a T-shirt, turned up one day in a Ford pickup to give Roberts a lift. A 12-pack of Budweiser rested on the front seat. Roberts says he’s invested several hundred thousand dollars and Meyer has been great.
“How many hedge-fund managers can you get to call you back? The guy that’s actually the investment officer or, you know, chairing the fund? It just doesn’t happen," Roberts says.
Roberts and Recknagel say they’ve also enjoyed a Statim perk: Meyer extends inexpensive short-term loans against their investments. Recknagel says he’s used the money to invest even more with Meyer. He says he also has a Statim corporate American Express card.
Perks aside, both men say they get scant information about Arjun beyond sporadic investor letters, usually written by Meyer’s wife, Nija. One reviewing Arjun’s 2015 performance said the main share class posted a gain of almost 24 percent that year, when “volatility on an intra-day basis was historical.”
Since Statim doesn’t send audited financial statements to its investors, they’ll have to take Meyer’s word for it.
--With assistance from Brian Welcher, Vincent Bielski and Anita Sharpe. To contact the reporters on this story: Simone Foxman in New York at [email protected] ;Margaret Newkirk in Atlanta at [email protected] To contact the editors responsible for this story: David Gillen at [email protected] ;Christian Baumgaertel at [email protected] Melinda Grenier