Hedge Funds are professionally managed investment funds that are sold to investors which are designed to provide absolute returns with low-correlation to the overall securities markets. Hedge funds do not receive the same level of regulations as other pooled investment accounts like mutual funds because they serve the investment needs of sophisticated institutional and accredited investors. Hedge funds are typically more aggressively managed through the use of futures and derivatives securities that can leverage returns and/or limit downside risks.
Hedge funds investment strategies rely on the unique ability and insights of hedge fund managers that make high-risk, speculative investment decisions about securities market indexes, debt instruments, currencies and commodities through the use of use of leverage, derivatives contracts, futures contracts, price arbitrage to realize greater risk-adjusted returns than traditional investments. Hedge fund investment strategies include:
- Managed Futures Strategies;
- Global Macro Strategies;
- Long/Short Equity Strategies;
- Emerging Markets Multi-Strategies;
- Event-Driven Strategies; and
- Multi-Strategies (Fund of Funds).
The securities industry experience with institutional investors and high net worth (HNW) accredited investors have led them to target retail investors with similar investment strategies bundled into more liquid and regulated investment vehicles. The trend towards hastening the use of hedge fund-type investment strategies accelerated over the last decade due to the dismal returns realized by retail investors that utilized traditional investments in buy-hold strategies. The challenges the securities industry faces on the retail investors’ front include the need to supervise and train their sales force and comply with increased sales practice regulations set forth by the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC). FINRA underscored its concerns for retail investors through an Investor Alert: Alternatives Are Not Your Typical Mutual Funds which cautions investors about the difference between alternative investment strategies utilized in mutual fund offerings.
Our lawyers pursue investor claims for Financial Industry Regulatory Authority (FINRA) sales practice violations against brokerage firms, investment banks, and others with regard to hedge fund investments. The claims related to conflicts of interest , misrepresentations and omissions of material facts , undisclosed fees and commissions, illiquidity, failure to conduct adequate due diligence, failure to supervise and train registered representatives on how to properly sell these types of investments, failure to provide investors with a full, fair and balanced presentation, and violations of the federal and state securities laws.
Our team of lawyers can help you determine whether an investment loss in hedge funds is the result of securities fraud or FINRA sales practice violations. If an investor suffers losses from a hedge fund they may be able recover their losses in a FINRA arbitration claim.