LJM Preservation and Growth Fund Share Price Plummets. Investors File Lawsuits For Loss Recovery

LJM Capital Preservation and Growth Fund (NASDAQ: LJMIX)

LJM Capital Preservation and Growth Fund (NASDAQ: LJMIX) is operated by the investment firm LJM Partners. The fund has dropped in price and is not actively traded. However, the U.S. News & World Report says that the investment “seeks capital appreciation and capital preservation with low correlation to the broader U.S. equity market. Investors are currently filing lawsuits to recover losses.

Haselkorn & Thibaut (InvestmentFraudLawyers.com) has opened a fraud investigation into the selling of LJM Capital Preservation and Growth Fund. Investors are encouraged to call them at 1-800-856-3352  for a free consultation on the recovery of losses.

Under normal circumstances, the fund invests primarily in purchased (aka “long’) and sold (aka “short’) call and put options on Standard & Poor’s 500 Futures Index (“S&P’). The fund seeks to achieve its investment objectives by capturing gains on options sold on S&P futures contracts that can be purchased (“closed’) at a later date for a lower price than the price realized when originally sold.”

LJM Capital Preservation and Growth Fund (NASDAQ: LJMIX)
LJM Capital Preservation and Growth Fund (NASDAQ: LJMIX)

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Chronology of events leading to the LJM Fund price decline

  1. Launched in 2013, three different share classes (ticker symbols LJMAX, LJMCX, LJMIX) were offered by the LJM Preservation and Growth Fund (the LJM Fund).
  2. The prospectus of the LJM Fund stated that the objective of the fund was “capital appreciation and capital preservation with low correlation to the broader U.S. equity market”.
  3. Net assets valued at $768 were on the LJM Fund’s books as of the 31st of October, 2017.
  4. Using complex options strategies, the fund is understood to have placed large bets that, for returns, are dependent on the markets not experiencing volatility during the investment period.
  5. These investment strategies could be seen as being inimical to the stated objectives of the fund.
  6. On the 5h and 6th of February, 2018, the Fund lost 80% of its value, leaving investors poorer by approximately $600 million.

Analysis of events of LJM Preservation and Growth Fund

Starting life as a high-risk alternative mutual fund, the LJM Preservation and Growth Fund (LJMAX, LJMCX, LJMIX) received a body blow when the volatility index (VIX) spiked. This led to the share price plummeting from $9.67 to $4.27 on a single day, a fall of over 50%. Compounding the issue was the fact that shareholders were in the dark as the decline was not reported by the fund (ticker: LJMAX) till well into the following day.

More was to come. The following day, the 6th of February, the slide continued uninterrupted, leaving the price at an unbelievably low $1.94, another single-day decline of over 50%.

According to Gretchen Rupp, a Morningstar analyst covering the fund. “It may be the biggest two-day drop for a mutual fund ever.”

It is understood that in many cases investments were made into the LJM Preservation and Growth Fund based on the recommendation of investment advisors.

Many FAs, it is also understood, employed the ‘sleeves’ strategy for third-party tactical mutual fund allocation. The brainchild of Horter Investment Management (HIM), the ‘sleeves’ strategy had been marketed to more than 250 representatives and investment advisors. 210 RIA firms are understood to have established a relationship with HIM, which is an SEC (Securities Exchange Commission) Registered Investment Advisor (RIA) based in Cincinnati, OH. It came into existence in 1991 with a stated goal of “risk mitigation, capital preservation and minimizing drawdowns so that people don’t get hurt with severe corrections or a bear market.” It has projected itself as an advisor to other investment advisors.

Investment Suitability

It is important that financial advisors get to know their customers, their goals, investment objectives, and their willingness for them to take on risks. Unsuitable securities recommendations are one of the most serious violations in the brokerage business. Unsuitable recommendations of securities are considered dishonest, unethical, and fraudulent business practices. The customer can recover any financial loss if such a recommendation is made.

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Securities brokers are required by law to only recommend securities the broker believes are appropriate for their customer. A reasonable inquiry about the customer’s investment goals, financial situation, tax status, and other security holdings must inform the broker of the broker’s belief.

A broker recommending speculative securities for a customer who has conservative investment goals or objectives is one of the most common causes of a suitability violation. A retired person might be an example of a conservative investor. He or she needs income to pay for their living expenses, and cannot recover from trading losses.

The three main criteria for deciding whether an investment is suitable are the client’s investment objectives, time horizon, and risk tolerance. These selections are usually made by brokers in a “check-the-box” format, which is supposedly based upon information provided by the client. Brokers have a duty of collecting essential information to help understand an investor’s risk tolerance, tax considerations, client’s past experiences, appetite for risk, as well as the desired level of return. A broker’s duty is to make appropriate and appropriate recommendations for his client’s situation. A broker who makes inappropriate recommendations for a client may be held responsible if he violates these duties.

Legal recourse for affected investors

If you have been sold the LJM Preservation Growth Fund (LJMAX, LJMCX, LJMIX), or another high-risk investment for that matter, and that has resulted in a loss, you may be able to recover your losses from the brokerage firm that sold you the investment. Speed, however, is of the essence, since securities cases attract a relatively short statute of limitation.

Haselkorn & Thibaut has a history of taking up the cause on behalf of elderly investors as well as other conservative investment groups. This is especially where investors have lost money on account of the investments being high risk-prone, with the LJM Preservation Growth Fund (LJMAX, LJMCX, LJMIX).

Such investors placing their money in LJM Preservation Growth Fund (LJMAX, LJMCX, LJMIX) which is understood to carry considerable risk, is likely to be the result of overzealous, as well as unprincipled, not to say outright fraudulent, selling effort on part of brokers and their firms. It is no surprise that many have lost a considerable portion of their retirement funds.

Please note that there is no fee for a case evaluation. Most of their work is done on a contingency basis; unless there is recovery, you do not pay legal fees. Further, you continue to remain the owner of your investments that you seek to recover losses incurred on.

Haselkorn & Thibaut (InvestmentFraudLawyers.com) has opened a fraud investigation into the selling of LJM Capital Preservation and Growth Fund. Investors are encouraged to call them at 1-800-856-3352  for a free consultation on the recovery of losses.

 

 

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