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Morgan Stanley / Ceres Managed Futures Funds

Morgan Stanley Smith Barney, LLC (MSSB) through Morgan Stanley Wealth Management and Ceres Managed Futures, LLC, which are both owned and controlled by MSSB, market and manage the sale of the Morgan Stanley Spectrum Series of Managed Futures Funds. Morgan Stanley Smith Barney and Ceres Managed Futures, LLC 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 MSSB Spectrum Series of Managed Futures Funds.

The rationale provided by Morgan Stanley’s financial advisors used to support its recommendation that investors allocate a portion of their portfolio in managed futures contracts, is to generate portfolio returns with greater returns on a risk-adjusted basis. The purported low correlation of managed futures funds with the overall securities markets provides superior results for an investment portfolio during “down markets” which smooth portfolio returns over time. Morgan Stanley financial advisors caution investors that they cannot “market-time” when to invest in managed futures funds which they argue makes investments in managed futures funds a permanent part of a buy-hold asset allocation strategy.

The Morgan Stanley Spectrum Series of 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 access invests in non-traditional asset classes that have a low correlation with traditional equity and fixed income securities markets resulting an overall increase in investment returns on a risk-adjusted basis.

At issue for investors is the performance of Morgan Stanley’s managed futures funds after the management fees have been deducted from the account. In most instances, investment advisors are 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 loss of trading profits from a poorly-explained regime of excessive fees and conflicts of interest designed to enrich Morgan Stanley.

The Morgan Stanley Spectrum Series of managed futures funds are privately-placed and are sold to institutions and high-net-worth investors. Morgan Stanley Wealth Management offers various managed futures funds, including:

  • Morgan Stanley Smith Barney Spectrum Strategic L.P.
  • Morgan Stanley Smith Barney Spectrum Technical L.P.
  • Morgan Stanley Smith Barney Spectrum Currency and Commodity L.P.
  • Morgan Stanley Smith Barney Spectrum Global Balanced L.P.
  • Morgan Stanley Smith Barney Spectrum Strategic L.P.
  • Morgan Stanley Smith Barney Spectrum Select L.P.
  • Polaris Futures Fund L.P.
  • Meritage Futures Fund L.P.
  • LV Futures Fund L.P.
  • Managed Futures Premier BHM, L.P.
  • Managed Futures Premier Graham L.P.
  • Managed Futures Premier Aventis II L.P.
  • Managed Futures Premier Warrington L.P.

Silver Law Group is currently investigating whether Morgan Stanley Spectrum Series of managed futures funds managed by Ceres Managed Futures, LLC 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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