Articles Tagged with F-Squared

The SEC has ordered four entities of Transamerica to refund $97 million to investors after discovering that faulty investment models used for fund management didn’t work as it was purported.

Aegon USA Investment Management, operating through Transamerica Asset Management, Transamerica Capital, Inc. and Transamerica Financial Advisors, discovered the model’s inconsistencies, but didn’t notify anyone when they stopped using it. This kept investors from understanding the risks and kept them from making more informed decisions about their investments.

The quantitative investment models were developed by an inexperienced junior analyst who had no experience in portfolio management. Once the company discovered the errors, the models were quietly taken out of circulation. Investors put billions of dollars into mutual funds and other accounts that used these models, which were sold as “model driven” and “model supported.” However, there was no hard evidence that these models actually worked, and no disclosure of risk was ever offered.