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Senate Inquiry Faults Hedge Funds’ Tax Strategy

mercredi 23 juillet 2014

Senate Inquiry Faults Hedge Funds’ Tax Strategy

By ALEXANDRA STEVENSON July 21, 2014 5:13 pm

Updated, 8:27 p.m. | A Senate investigation has found that hedge funds — in particular, James H. Simons’ Renaissance Technologies — used complex financial structures to claim billions of dollars in tax savings.

Between 1998 and 2013, more than a dozen hedge funds conducted hundreds of billions of dollars in trades using hundreds of structures, known as “basket options,” created by Barclays and Deutsche Bank, the Senate Permanent Subcommittee on Investigations said in a report on Monday. Over a period of more than a decade, Renaissance avoided more than $6 billion in taxes alone, the subcommittee estimated in the 93-page report.

Other hedge funds, including Steven A. Cohen’s SAC Capital Advisors, also used basket options, the investigators said.

“These banks and hedge funds involved in this case used dubious structured financial products in a giant game of ‘let’s pretend,’ costing the Treasury billions and bypassing safeguards that protect the economy from excessive bank lending for stock speculation,” said Senator Carl Levin, the Michigan Democrat who is chairman of the Senate subcommittee.

The findings — based largely on an investigation into the two biggest users of the products, Renaissance and George Weiss Associates, a multistrategy hedge fund based in New York — will be the subject of a Senate panel hearing on Tuesday in Washington. Peter Brown, co-chief executive of Renaissance, and senior executives from Barclays and Deutsche Bank are scheduled to testify. Lire la suite.

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