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A Top Mutual Fund Executive Made Millions for Himself Trading the Same Stocks His Giant Fund Was Trading

One such shareholder was David Hoeft, a member of the Dodge & Cox committee that made the decision to buy the shares and an advocate for investing in technology companies. Hoeft, who has spent 30 years at Dodge & Cox, is now the company’s chief investment officer.

For decades, regulators have tried to clamp down on front-running, the term for when investment professionals make personal purchases or sales of securities when they know that their employers or clients are about to buy or sell the same securities. But a massive assemblage of confidential stock trading data obtained by ProPublica reveals that the practice may be continuing on a notable scale.

Hoeft is one of dozens of investment managers at hedge funds and mutual funds who personally traded the same securities that their organizations were buying and selling, ProPublica found. He stood out in this group for the volume and fortuitous timing of such trades. From 2011 to 2019, Hoeft traded stocks on at least 31 days in the same quarter or the quarter before Dodge & Cox traded the same securities. The transactions were worth nearly $50 million. (All told, Hoeft’s personal trades, most of them in stocks his employer was not trading, totalled more than $725 million during the period.)

deegeese ,

Smart enough to front run his employer’s trades.

Dumb enough to do it under his own name.

Would never have been caught if he used burner shell companies.

catchy_name ,

This somewhat recent law might make hiding behind shell companies more difficult:

apnews.com/…/business-miami-money-laundering-legi…

sudoshakes ,

The front running trades amounted to a total of 6% of all the personal trades he made in that period.

I think he was assuming, that inter dispersed in the group and traded in segments of the sums, it would be hard to dig through the mountain to spot the relationships to the company trades.

deegeese ,

That’s like a funeral director saying they can get away with murder because they handle lots of dead bodies.

Investigators weren’t looking at his trades, they were looking for any trades that looked like front running.

When they found these, they were all under his real name.

sudoshakes ,

I work for one of the largest private investment firms in the world.

The scrutiny is something I understand well. We have a lot more thorough checks than his firm does. Real name, kids, spouse, girlfriend living in your house, parents, all part of the review process and more. Significant individuals as well as non-person entities you are tied to in any way.

You could, in theory, still get past it, but you would be doing a lot more money movement to do so.

SheeEttin , 

<span style="color:#323232;">select * from trades a 
</span><span style="color:#323232;">left join trades b on a.symbol = b.symbol
</span><span style="color:#323232;">where a.trader = 'dodge &amp; cox' and b.trader = 'david hoeft'
</span>

Oh look at that, a lot of overlap.

sudoshakes ,

hah, you think these trades are in a 3rd normal form database instead of unsorted excel sheets passed for nightly batch job settling transactions? Nahhhhh fam.

deegeese ,

You’re missing the point that once you have the trade info in a DB, finding insider trading is no longer a needle in a haystack problem.

The interchange format may be garbage, but everyone loads it into a DB as their normal business process.

Pulptastic ,

If you’re gonna profit off my trades at least don’t double dip and charge me.

detalferous ,

You are too permissive. Throw these bastards in jail.

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