Hedge fund takes 4.2 per cent stake in Collins Stewart Tullett

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The Independent Online

Toscafund, the hedge fund run by the former deputy chief executive of Credit Lyonnais Laing, Martin Hughes, has turned its focus again on Collins Stewart Tullett, the fund manager and broker, yesterday, taking a 4.2 per cent stake in the company.

Toscafund, the hedge fund run by the former deputy chief executive of Credit Lyonnais Laing, Martin Hughes, has turned its focus again on Collins Stewart Tullett, the fund manager and broker, yesterday, taking a 4.2 per cent stake in the company.

The hedge fund first bought a 6 per cent stake in Collins Stewart in January 2003, in the run-up to its £251m acquisition of Tullett & Tokyo. However, it then sold out just five months later, taking a 30 per cent profit - of more than £5m.

Two months later, Collins Stewart's shares plunged as it became embroiled in a high-profile dispute with James Middleweek, a former analyst for the company.

Mr Middleweek publicly made allegations of market abuse. Following those reports, Collins Stewart's shares tumbled from a high of 494p in August, to just 302p in October - a fall of almost 40 per cent.

After being dismissed by the company, Mr Middleweek launched a £3m claim against Collins Stewart, which is set to be fought in the High Court this October. He also passed on material to the Financial Services Authority, which is currently being examined.

Terry Smith, the chief executive of Collins Stewart, has constantly denied that there is any truth behind Mr Middleweek's allegations. Collins Stewart is suing the Financial Times over its reporting of the matter.

Collins Stewart's shares have since recovered to last June's levels of more than £4. Yesterday, the stock was up 1.5 per cent to 416.5p, giving the company a market value of £787m.

Toscafund is a well established hedge fund investing primarily in the financial sector, both in the UK and US. The fund is believed to have assets of about £1bn.

As well as its position in Collins Stewart, it is also a major investor in Amec, the international engineering services group, in which it took a 7 per cent stake earlier this year. In March, Toscafund also took a 10 per cent stake in the London taxi manufacturer Manganese Bronze, which it increased to 12 per cent last week. The fund also has a 6.7 per cent stake in Hornby, the model train producer.

Mr Hughes set up the fund four years ago after moving on from Tiger Management, another hedge fund operator. Within two years of setting up Toscafund, Mr Hughes was reported to have made more than £10m.

Previously, Mr Hughes was deputy chief executive at Credit Lyonnais Laing, the French stock-broking group, having made his name in the 1990s as the No 1-rated banking analyst. His biggest profits for investors as a hedge fund investor have been made in falling equity markets.

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