Mark Denning, who helped to run $300bn of assets at Capital Group, has resigned from his role after he was alleged to have secretly bought shares for his own benefit in some of the same companies as his funds.
Denning allegedly opened a secretive fund based in Liechtenstein, called Morebath Fund Global Opportunities, which apparently is named after the village of Morebath in North Devon, where Denning owns a nine bedroom house and 21 acres of parkland.
The fund is bought shares in three companies on Denning's instructions, leaked documents seen by the BBC's Panorama programme show. These companies were Australian medical researcher Mesoblast, Indian film maker Eros International and UK-listed gold miner Hummingbird Resources.
The BBC said the stakes in the trio were ultimately held through an offshore entity called the Kinrara Trust, which was set up and controlled by Denning.
Capital Group invested in the three relevant companies, with the former two being held in funds run by Denning and the latter appearing to be run by the fund manager's son-in-law.
Fund managers are not supposed to invest in the same companies as their funds, because they could profit at the expense of investors. Michael Ruck, investigations partner at law firm TLT, told Panorama that the private purchases could represent a serious conflict of interest.
"The whole point behind the regime, in relation to declaring conflicts of interest, is to protect investors. If there was an intention by the fund manager to financially benefit themselves, then that does raise serious concerns in relation to their actions," he explained.
Denning quit Capital Group just five days after the BBC wrote to the firm about its findings.
A spokesperson for Capital Group said Denning was no longer with the firm: "We have a Code of Ethics and personal investing disclosure requirements that hold our associates to the highest standards of conduct. When we learned of this matter, we took immediate action."
Denning was a manager on four of Capital Group's funds - American Funds EuroPacific Growth; American Funds Capital World Growth and Income; American Funds New World; and American Funds New Economy.
However, Capital Group told PP sister title Investment Week that Denning was not solely responsible for all four funds, with all the firm's funds run by a team of generally between two and 12 managers.
Denning denies any wrongdoing, with his lawyers saying he does not own shares in the three named companies as he is not a beneficiary of the Kinrara Trust.
The lawyers said: "Our client did not declare his interest in the Kinrara Trust to his former employers because he had been irrevocably excluded as a beneficiary. He believed that he had complied with all of his relevant duties."
They also say his error was to rely on the advice of a former professional advisor and that the Morebath fund had an independent asset manager and fund administrator.
The BBC Panorama programme, which investigates the collapse of Neil Woodford's funds empire, airs at 8.30pm on Monday (21 October).
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