HEDGE FUND SHUTS DOWN AFTER SEC CHECK

A Bear Stearns-backed hedge fund is shutting its doors under a mysterious cloud after regulators discovered an unusual, potentially improper pay deal in which one of the Wall Street giant’s brokers was caught matching super-rich investors with secretive investment pools.

The closing of Mosaique Capital Management, a $374 million fund based in Los Angeles, comes after a Securities and Exchange Commission audit found that a Bear Stearns broker was being paid by both the fund and by the investors it sought.

The fund, a so-called fund of funds that invests in other hedge funds instead of individual stocks or bonds, is 25 percent owned by Bear Stearns and run by Andrew Haas, a 25-year veteran of the firm who ran its Los Angeles branch until late 1999.

The SEC tagged Mosaique when it uncovered a commission the fund paid to a Bear Stearns broker who had recommended it invest in another hedge fund.

The Bear broker, however, apparently did not disclose to his firm or to Haas that he also had a solicitation agreement to be paid by the other hedge fund, which has not been identified, to locate new investors.

Being paid by both parties, both the fund and the investor, is a violation of NASD rules.

Hedge Fund Alert, a hedge fund industry trade publication that first reported Mosaique’s closing, said Bear has since fired the broker.

A Bear spokesman declined comment.

Closing the fund over the SEC’s findings, however, is unusual. The fund was consistently profitable and returned 5.59 percent last year, and in 2003 was up 14.11 percent.

Haas announced – in a letter obtained by The Post – that he is retiring at the end of the year but that the liquidation of the fund will be handled by a Bear Stearns executive.

“Haas was the fund. He made the decisions and had the relationships with the funds they invested in,” said one hedge fund executive. “Why isn’t he overseeing the liquidation of the fund? Why is he completely out of the picture?”