John Hempton of Bronte Capital Pledges to Target Australian Markets Rich in “Fraud”

Although defamation laws do not apply to companies with more than 10 employees, Mr Hempton said ASIC has now “stacked up” by “legislating by regulation” to take a closer look at hedge funds vocal or activist.

“If you publicly criticize a company you’ve negotiated, you can expect regulatory inspection, over thirty thousand dollars in legal bills, and only if you’re lucky,” he said.

“ASIC has got into the habit of accompanying the federal police in raids on your doorstep against completely honest salespeople. “

Australia now “golden” for crooks

Mr. Hempton worked with ASIC’s market surveillance team, teaching them how to use the data to detect irregularities.

Mr Hempton is a former Treasury official who rose to prominence when he exposed Albury’s fund manager, Trio Capital, for bankruptcy in 2009.

Most recently, he drew ASIC’s attention to Insurance Australia’s disproportionate exposure to Greensill, before the supply chain financier collapsed. However, Mr Hempton was questioned under oath by ASIC after making his concerns public, which caused IAG shares to fall.

“We see no evidence of bad intentions at ASIC, but their actions make it less likely that corporate crime will be uncovered in Australia,” Hempton said.

“In the past, we (and a few others) gave information to ASIC – some of which led to crooks going to jail. But if you tell the new ASIC (or the press for that matter) of a crime, you’re more likely to get a subpoena than a thank you note. The consequences are obvious.

“ASIC, through its actions, has improved the environment for scams in Australia. Australia has always been good for crooks, but now it’s golden.

Mr Hempton recently criticized the appointment of former Deutsche Bank general counsel Joseph Longo as Australia’s best corporate cop, arguing the bank was a ‘sump’ of fraud.

“Frankly, we believe millions of people will lose thousands of dollars in their retirement pensions due to fraud. And we believe that ASIC’s policy, developed without legislative support, has made the situation worse, ”he said.

“We are going to scams in Australia. But we won’t tell anyone specific details as that will annoy the regulator. The frauds will continue. There will be a transfer of retirement money from working Australians to crooks. This is how the game is rigged here.

Last year, the corporate regulator asked activist sellers to tone down their emotional language and release their reports on ASX-listed companies after market trading hours to allow investors to digest and respond to questions. revelations.

“The retail mania has a lot more to relax on”

Activist vendors are a relatively new phenomenon in the Australian market. Since around 2018, they have made public negative reports on listed companies such as Blue Sky, Quintis and Corporate Travel Management. More recently, groups like Rural Funds Group, Wisetech and Seek have been targeted.

ASX-listed lithium explorer Vulcan Energy sued seller J Capital and its principal Tim Murray for libel after a critical research report. Murray was forced to apologize following a Federal Court settlement.

Due to the influx of retail investors increasing the overall equity market since the start of the pandemic, Mr Hempton said Bronte Capital has reduced the size of its positions, but has doubled the number of target companies against which he was betting.

“We think the retail mania has a lot more to unwind. books should work well in this environment. For the reasons stated above, we believe this – at least relative to the size of the economy – will play particularly strongly in Australia, ”he said.

“The market is on the brink of historic highs. And yet our book is doing well. The retail craze has slowed down.

“Over the past six months, we’ve made money on our book despite the market hitting many new highs.”

However, Mr Hempton said the company’s long investments had not “kept up with the market”, pointing to the underperformance of Swedish Match and Herbalife.

The Amalthea Fund returned 19.3 percent in the six months to December, a better start to the year given the 10.7 percent decline in the previous year over the 12-month period. month.

The fund has recorded an annualized return of 12.1% since its inception in 2013, underperforming its benchmark which returned 15.3% per annum over the same period.