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Hedgeweek Comment: Making the worst of a bad job?

SRM Advisers, the Monaco-based hedge fund management firm run by the former star UBS proprietary trader Jon Wood, is suing the Wall Street Journal for publishing what it says was confidential information about its performance. However, the action is only likely to focus further attention on the disastrous nature of that performance.

Last August the newspaper's web site reported in two articles, under the headlines 'Woods Fund Takes a Beating' and 'Hedge Fund Suffers Sharp Losses', that Wood's SRM Global Master Fund had lost 85 per cent of its value since its launch in September 2006 with USD3bn in investors' assets.

Over the past year the fund is believed to have lost heavily on investments in US mortgage lender Countrywide Financial, which was rescued in extremis by Bank of America, investment bank Bear Stearns, which was acquired cheaply by JPMorgan, and UK mortgage bank Northern Rock, which was taken over by the British government.

In the case, which is scheduled to be heard before the High Court in London, SRM is expected to argue that the WSJ received the performance information from an investor who was bound by a duty of confidentiality, and thus the news organisation was bound to respect the confidentiality requirement, as the reporter was apparently warned when he called SRM to request comment.

The WSJ denies that it owed SRM any duty of confidentiality, arguing that the articles represented 'responsible journalism on matters of legitimate public interest'. It also says that in its argument with the UK government over compensation for Northern Rock investors and a dispute with Arcelor Mittal over the terms offered to Arcelor minority shareholders in the merger that created the world's largest steel company, SRM has not hesitated to court publicity whenever it seemed advantageous to do so.

It seems highly unlikely that SRM would have resorted to injunctions and lawsuits had the WSJ been reporting on its profits rather than losses.

If Wood were to win his case, it would cast a chill over reporting on hedge funds and any other financial market players not legally required to make public their accounts or investment results - hardly a step toward the greater transparency that politicians, regulators and even some industry members say is required in the future.

However, no success in the courts can expunge public awareness of SRM Global's losses over the past two years, or salvage Wood's once stellar reputation as an investor. If anything, the proceedings will only highlight their woes - which makes one wonder why the lawsuit was brought in the first place.

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