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Founder of $3 billion hedge fund busted in prostitution sting

Wednesday, 4 Sep 2013 | 12:54 PM ET
Is this hedge fund using its 'common sense?'
Wednesday, 4 Sep 2013 | 1:42 PM ET
The founder of Common Sense Investment Management Jim Bisenius has been busted in a prostitution sting. CNBC's John Carney has the details.

The founder of a hedge fund with more than $3.2 billion under management was busted by police in Tigard, Oregon, for allegedly patronizing a prostitute, according to Tigard's police department.

Jim Bisenius, who founded the Portland-based Common Sense Investment Management in 1991, was arrested on Thursday, August 29th, along with eight other men in a crackdown on prostitution in Tigard.


James Allan Bisenius
Source: Washington County Sheriff's Office
James Allan Bisenius

Common Sense Investment Management is a fund of funds with $3.2 billion under management, down from $3.9 billion the year prior and $4.2 billion in 2011. The Common Sense Long Biased Offshore fund is up 8.3 percent this year through July 31, according to a report from The University of Toledo Foundation, which has $5.85 million with Bisenius' firm. That's better than the 5.3 percent gain by the InvestHedge Composite Index, a fund of funds benchmark score from HedgeFund Intelligence. The net annualized return for the fund since May 2008, when the foundation first invested, is 1.8 percent, according to the report.

Common Sense was the 46th largest fund of funds globally as of December 31, according to ranking by InvestHedge. Blackstone Alternative Asset Management is the largest, managing $44.81 billion at year end.

An investigation by the Portland Business Journal last spring found that the investors in Common Sense's funds include the Cincinnati Retirement System, the Oklahoma Municipal Employees Retirement fund, the Fresno Country Employees Retirement Association, and the Illinois Student Assistance Commission.

One Common Sense investor, The Oklahoma Municipal Employees Retirement fund, is aware of the situation and is redeeming their approximately $30 million investment. The decision, however, was made earlier and is unrelated to the arrest, according to pension director and chief executive officer Cindy Shattuck. Other pensions did not immediately respond to requests for comment,

Bisenius was picked up by Tigard police in a sting operation in which the police placed advertisements for prostitution services on websites, which was first reported in the local media. He was held in the Washington County jail.

A spokesman for the Tigard police said the arrests took place in the late afternoon at a local hotel.

"We placed an online ad and within the first four hours we had arrested seven people. Our decoy officer was getting phone calls almost immediately," the spokesperson said.

The goal of the police operation was to "send a strong message that Tigard is not the place to conduct this type of activity," the spokes person said.

There is, of course, a great irony to calling your fund "Common Sense" and then getting busted for alleged prostitution.

Common Sense Investment Management did not have a statement immediately available. Bisenius could not be reached directly.

Update: Business Insider's Julia La Roche reports that she has received the following statement from Common Sense.

For more than two decades, Common Sense Investment Management (CSIM) has brought superior risk adjusted returns to our investors and clients. CSIM's success is about a team of committed and driven investment professionals; not one individual. Jim Bisenius' recent personal transgression bears no reflection on this outstanding team of professionals or the quality of portfolio management at CSIM.

Going forward, the firm's partners have decided that Jim will remain in his role as Chief Executive Officer and Chief Investment Officer and he will deal with this recent event as the personal matter that it is. Our investment process and decision making will continue to be made by our investment committee, which is comprised of our President, four Portfolio Managers, Director of Operational Due Diligence, Director of Risk Management and myself. All management decisions continue to be made by the management team. We look forward to building on CSIM's successful 22-year track record and creating value for our investors.


—By CNBC's John Carney. Follow me on Twitter @Carney

Additional reporting by Lawrence Delevingne

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