Hedge Fund Investment Fraud

What Are Hedge Funds?

Hedge funds are a type of private investment in which investors’ funds are pooled and then reinvested in various other investments or investment strategies. Hedge funds are not required to register with the Securities and Exchange Commission (SEC) or file reports with the SEC.

On the other hand, hedge funds are subject to the anti-fraud provisions of the securities laws. Hedge fund managers have the same fiduciary duties as other investment advisors. Securities brokerage firms that sell hedge fund investments must provide the same level of professional responsibility as they would when recommending any investment.

Assert Your Rights Against Hedge Fund Investment Fraud

If you believe your hedge fund manager breached his or her fiduciary duty or misrepresented the benefits of investing in hedge funds, contact my securities law firm for a free initial consultation. I am Chicago hedge fund fraud lawyer John C. Barlow with more than 33 years of experience. I can review the facts of your case to understand if you have a valid hedge fund investment fraud claim.

Investors Can Be Attracted to Hedge Funds for the Wrong Reasons

Investors often invest in hedge funds for the wrong reasons. Investors are attracted to hedge funds after being dissatisfied with volatile, low-returns and are seeking diversification. They want better returns and protection against risks. Hedge funds are a securities product that promise high returns plus downside protection, regardless of economic and investment conditions.

With regard to downside protection, many hedge funds claim to be an alternative and non-correlated investment hedge against the price movements of equities and bonds. In theory, volatility is reduced as a hedge fund tends to move up when equities and bonds move down, and vice versa. Many hedge funds also claim to provide downside protection by using quantitative strategies and long-short strategies.

Generally, the statistics do not support the claims made by most hedge funds. During tough economic times, most hedge funds have shown high correlations to other asset classes and have experienced significant losses.

Hedge Funds Can be Susceptible to Risk

Hedge funds suffer from the array of risks that are associated with all alternative investments. They are extremely complex, often using advanced mathematical strategies and sophisticated computer programs. Hedge funds can also be risky for the following reasons:

  • They are not transparent
  • They can have very little liquidity
  • They often have expensive fee structures
  • They are rarely understood or suitable for most investors.

Wall Street has convinced many investors that by paying a large fee to hedge fund managers, the managers will make more money for investors. However, many experts say there is no evidence that any hedge fund manager has been able to consistently beat an appropriate benchmark. The experts argue that the occasional successes are attributable to luck more than skill.

Contact Hedge Fund Investment Fraud Attorney John C. Barlow in Illinois

If you were misled into the benefits of investing in a hedge fund, contact my Chicago law firm for a free initial consultation. This is a highly complicated area of securities law. I will apply my comprehensive background over the past 33 years to determine if you have a valid claim. All of my investment fraud claims are handled on a contingency basis. This means you would owe me nothing, unless I am able to recover compensation for you.