NEW YORK (Reuters) – An investor on Friday filed a lawsuit towards managers of a U.S. mutual fund that relied closely on a technique that income from calm markets however lost four-fifths of its value in turmoil this week.
In a grievance in search of class-action standing filed in U.S. District Court in Chicago, investor Leonard Sokolow stated he owned shares of LJM Preservation and Growth Fund, a once-$800 million fund that lost most of its value regardless of touting its potential “to deliver solid returns while maintaining risk parameters” in its most current annual report back to shareholders.
“In truth, however, [the fund] was not focused on capital preservation and left investors exposed to an unacceptably high risk of catastrophic losses,” the grievance stated.
A spokesman for Chicago-based LJM Partners Inc, mother or father of the fund’s working unit, couldn’t be reached.
The LJM fund seemed to be the newest casualty in a collection of spectacular blow-ups of funding methods that successfully guess on low or falling volatility.
Investors hungry for larger returns piled into choices, futures, swaps and exchange-traded merchandise that made such bets, in some instances incomes triple-digit annual returns in recent times.
Credit Suisse stated on Tuesday it might terminate the second-largest publicly traded product betting on future swings within the S&P 500 after its value plunged almost 93 % in someday through the international market rout.
LJM Preservation and Growth Fund had been run by Anthony Caine, a veteran of the 1990s know-how growth who later based LJM, and Anish Parvataneni, a former dealer for well-known investor Ken Griffin’s Citadel.
In an setting that has been robust on high-cost fund managers, the LJM fund took in $393 million in new money from buyers in 2017, its greatest gross sales since launching in 2013, in accordance with the Lipper unit of Thomson Reuters, regardless of charges as excessive as three.34 % a yr.
LJM closed the fund to new funding this week, a submitting with the U.S. Securities and Exchange Commission confirmed.
Reporting by Trevor Hunnicutt; Editing by Leslie Adler and Matthew Lewis