Oberlin Endowment Chair Resigns Following Fraud Charges
Thomas Kutzen, former investment chair, Oberlin CollegeThe investment chair for Oberlin College’s endowment has stepped down following US Securities and Exchange Commission (SEC) charges against him and his hedge fund AlphaBridge Capital Management.
The announcement came yesterday after nearly two weeks of silence from Oberlin, during which AlphaBridge founder and CEO Thomas Kutzen remained listed as in charge of its endowment board and a member of the executive, debt, and audit committees.
Kutzen, his compliance chief, and AlphaBridge fraudulently inflated asset prices of little-traded securities in their portfolio and passed those illegitimate figures onto auditors, according to the SEC. As a result, the fund allegedly overcharged investors and violated its fiduciary duty.
AlphaBridge’s clients included pension funds, sovereign wealth vehicles, high-net-worth individuals, and funds-of-funds, according to an October 2013 profile of Kutzen in Oberlin’s student news publication.
“The investigation by the SEC of AlphaBridge Capital Management did not involve or extend to Oberlin College or its endowment holdings.” —Oberlin
Kutzen and his head of compliance—who has been banned from the industry for three years—were not required to admit wrongdoing in settling the charges. They have, however, agreed to shut down AlphaBridge, reimburse more than $4 million in client fees, and pay personal fines. The SEC also censured Kutzen for his role in the alleged scheme.
“We have entered into this settlement because we believe the settlement is in the best interest of the AlphaBridge Funds and their investors,” he said when reached by CIO.
The investigation “did not involve or extend to Oberlin College or its endowment holdings,” the Ohio-based college stated in its announcement. The fund had not invested nor considered investing with AlphaBridge, according to the school.
It commended Kutzen for serving “with distinction for five years as investment committee chair” and “improving Oberlin’s endowment performance and risk profile.”
The $809 million fund slightly outperformed its peer group over the last two fiscal years, according to NACUBO-Commonfund data. In 2014, Oberlin gained a net 16.1% while similar-sized endowments earned an average 15.8%. The year prior, Oberlin topped its peers by 200 basis points with 12.2% growth.
The future leadership of the endowment remains unclear. An Oberlin spokesperson told CIO he had no information regarding Kutzen’s replacement nor the school’s position on keeping Kutzen had he not chosen to resign.
Kutzen will continue to support Oberlin in a variety of volunteer capacities, the college said.
AlphaBridge has six months to reimburse clients, pay nearly $1 million in fines, and shut its doors.
Oberlin College’s July 12th statement is reproduced in full below:
Oberlin College Trustee Thomas Kutzen, majority owner of AlphaBridge Capital Management, reached a settlement with the Securities and Exchange Commission on July 1, 2015 regarding an investigation related to the pricing of securities. AlphaBridge Capital Management agreed to the settlement, but neither admits nor denies the SEC’s findings.
Having served with distinction for five years as Investment Committee Chair, Kutzen has rendered substantial service to Oberlin, having led the Investment Committee in improving Oberlin’s endowment performance and risk profile. Kutzen has now retired from active service as a voting member of the Board but will continue to support the institution in a variety of volunteer capacities.
The investigation by the SEC of AlphaBridge Capital Management did not involve or extend to Oberlin College or its endowment holdings. Oberlin College has never held nor considered holding any positions in the AlphaBridge Fund.