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Merrill Lynch Managed Futures Funds

Merrill Lynch Alternative Investments, LLC (MLAI) managed futures funds investment management services consist of acting as sponsor, general partner, manager, investment manager and investment advisor to pooled investment vehicles with portfolios of managed futures funds are marketed and sold to institutional and high-net-worth (HNW) investors through the Merrill Lynch FuturesAccess Platform. The FuturesAccess Platform provides access to MLAI Portfolio Funds or Portfolio Managers in MLAI’s advisory products or services.

Many high-net-worth investors understand very little about managed futures funds. Managed futures funds, touted by Merrill Lynch’s financial advisors, are recommended because the Merrill Lynch FuturesAccess Platform allegedly provides investors with access to an asset classes not readily available through traditional investments vehicles. Merrill Lynch financial advisors recommend the FuturesAccess managed futures funds to generate portfolio returns which they argue provide greater returns on a risk-adjusted basis. The purported low correlation of managed futures fund returns provides superior results for an investment portfolio during “down markets” which smooth portfolio returns over time. High-net-worth investors rely on Merrill Lynch managed futures fund managers as the experts at trading futures contracts. However, these highly misunderstood managed futures funds are laden with excessive fees, costs and commissions which may dramatically impact potential investor’s return on investment.

The Merrill Lynch’s FuturesAccess managed futures funds invest in asset classes that include trading futures contracts in equity indices (i.e. developed and emerging markets), interest rates (i.e. U.S. Bonds, Eurodollar Bonds, Euro-Bund), commodities (i.e. energy, agriculture and metals) and currencies (i.e. Dollar, Euro, Pound, Yen). Through investments in managed futures funds, investors are allegedly able to invest in asset classes that have a low correlation with traditional equity and fixed income securities markets which can result in greater risk-adjusted returns for an investor’s total portfolio.

At issue for investors is the performance of Merrill Lynch’s managed futures funds after the management fees have been deducted from the account. In most instances, the investment advisor is compensated by a flat management fee based on assets under management. Additionally, an “incentive-based” fee is deducted based on profits in “up” years. This “performance-based” fee is usually paid net of all fees. In addition to management and performance fees, a managed futures account has deducted from the balance expenses for transactions costs and commissions. The net result for investors has been the erosion of trading profits from a poorly-explained regime of excessive fees and conflicts of interest designed to enrich Merrill Lynch.

The MLAI FuturesAccess Platform are privately-placed and are sold to institutions and high-net-worth investors. Merrill Lynch Alternative Investments, LLC offers various managed futures funds, including:

  • ML Systematic Momentum FuturesAccess LLC
  • Man AHL FuturesAccess LLC
  • ML Aspect FuturesAccess LLC
  • ML Winton FuturesAccess LLC
  • ML BlueTrend FuturesAccess LLC
  • ML Transtrend DTP Enhanced FuturesAccess LLC

Silver Law Group is currently investigating whether Merrill Lynch Alternative Investments, LLC and the FuturesAccess Platform managed futures funds are in compliance with the securities industry’s rules and regulations concerning the suitability and disclosure requirements related to the risks, fees and terms associated with the management of their managed futures funds. The focus of the investigation includes whether the fees and terms were adequately disclosed to investors for potential FINRA sales practice violations of misrepresentation or omission of material facts , and excessive markups and markdowns , and whether the recommendations made to investors resulted in unsuitable investment advice based on client investment ability to understand and assume the risks associated with managed futures funds.

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