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the FSA many times over and it’s always the same issues time and again. He’s also heard her mention Kronos on more than a few occasions, and tonight he is particularly curious to find out what she knows about Vasilakos and his business dealings.
    As soon as the Chinese food arrives (baked prawns for him, satay vegetables for her) and once they’ve got it all out onto some plates John decides now’s as good a time as any to get his fiancée to ‘talk shop’.
    â€œBeccs…. Kronos Capital Management, -you know quite a bit about them don’t you? They’re one of the companies you’ve investigated recently, yeah?”
    John’s work occasionally crosses over into areas that Rebecca also focuses on. “Why do you ask? Have they done something to suddenly be of interest to the police?” John knows it’d be unprofessional to divulge too much, so he gives her the briefest of explanations, “I’m tasked with interviewing the manager tomorrow along with my partner Bill. Anyway…all I managed to find out about them before leaving work is that they’re a hedge fund company, registered in the Caymans.”
    John already knows that the Cayman Islands are frequently linked with money laundering, where the direct or indirect proceeds of crime are put through a company (often a financial institution) in ways designed to conceal their true origins and ownership. If done professionally, the money concerned loses its criminal origins and appears legitimate. The Cayman Islands have a tarnished image because of many years of inadequate financial regulation which have only recently begun to tighten. It’s popular for companies to register there because it’s one of the least taxed places in the world, with no income tax and more importantly no corporation tax either.
    Rebecca’s face shows that she is pleased to be able to have a conversation with John about financial services which even she has to admit can be quite a ‘specialist’ subject. She begins enthusiastically: “Because of their unbelievable profits, which frankly are so large as to be highly suspicious, I can claim to be a bit of an expert in Kronos’s operations.” Momentarily she stops to take a sip of wine.
    â€œThey only started up in 1995 and now have more than £15 billion in assets under management. Since 2006 the company’s main £8 billion fund has averaged 35% annual returns, after fees, making it one of the most successful financial products in the world. Kronos charge a very reasonable management fee of 2% and a profit participation fee of 20%.”
    In the past there were several occasions when John wished his girlfriend wasn’t such a finance geek, but tonight he’s genuinely pleased that she clearly knows much about the man he’ll be interviewing tomorrow.
    â€œKronos Capital Management is one of the institutions that I’ve been most focussed on for the last 18 months. In fact we started looking at them about four years ago. Put simply, their hedge funds are just too good…
–They outperform most others by quite some way
and that’s a clear red flag that market abuse is going on. It’s run by a Greek called Alexis Vasilakos.”
    John nods, but plays dumb and asks “What else?”
    â€œWell” she continues “they have their own internal trading desk, staffed by over a dozen traders, and for something like 15 years Alexis’s has employed complex mathematical models to automatically execute a large proportion of their trades. But in the last four years, the performance of his funds has gone super-nova. I can’t see that Kronos is doing anything special compared to other hedge funds. Most of his competitors are also using computer-based models to predict price changes in easily-traded products. Everyone’s models are all pretty similar, based on analyzing as much data as can be gathered, then