Rydex Investments, a Rockville mutual fund company, may merge its SPhinX Fund into another fund after discovering that underlying assets have been frozen in the wake of the collapse of commodity broker Refco Inc.
The independent board of the SPhinX fund, a basket of hedge funds, is expected to vote this month on the rollover into the Rydex Absolute Return Strategies Fund. If approved by the board, the plan would be put to investors for a vote in February, said Jeff Joseph, managing director of the alternative investment group at Rydex.
The SPhinX fund became embroiled in the Refco scandal through its affiliation with PlusFunds Group Inc., which sponsored investment vehicles that were used by the fund and also had accounts that were held by Refco affiliates.
In October, Refco began unraveling when the company said its chief executive, Phillip R. Bennett, had hidden a $430 million debt owed to Refco by a company that he controlled. Refco also said its financial statements as far back as 2002 weren't reliable, and the company has filed for bankruptcy protection.
PlusFunds, in a letter to Rydex, disclosed that the court handling the Refco bankruptcy prohibited the redemption of about 10 percent of the SPhinX fund's assets.
Joseph said the Absolute Return Strategies fund might appeal to SPhinX investors in three ways: It has an open-ended structure so investors can exit any time rather than quarterly as with the SPhinX fund; it has "significantly" lower fees, and it pursues investment objectives similar to hedge funds.
The SPhinX fund was among the first hedge fund products to require lower minimum investments and to register with the Securities and Exchange Commission, according to Rydex. The fund reached a peak of $275 million in assets last year.
laura.smitherman@baltsun.com
