LJM Partners, out of Chicago, Illinois, saw massive losses to its LJM Preservation and Growth Fund (“LJMIX”) in February, losing over 82 percent of the Fund’s value in a single week. The Fund held risky positions based on the CBOE Volatility Index, or VIX, which rose to near seven-year highs. The fund was overexposed to this volatility risk, suffering catastrophic losses while the market downturn was only around 5%.
LJM, however, had marketed the Fund as “seeking capital appreciation and capital preservation with low correlation to the broader U.S. equity market” and pitched its ability to “preserve capital, particularly in down markets (including major market downturns).”
Companies like LJM are required to make adequate and accurate disclosures in their marketing materials to allow investors to make informed decisions about their investments. Likewise, brokers recommending the LJM Fund to their clients were obligated to understand the Fund’s features and risks, to disclose those risks to their clients, and to make certain that the Fund was suitable to their clients prior to making a recommendation.
LJM investors have already filed LJMIX Lawsuit class-action lawsuits against LJM to attempt to recover their overwhelming losses. Investors have the right to opt out of those class actions and pursue individual claims against LJM and/or a stockbroker who misrepresented the LJM fund or recommended it to a client for whom it was unsuitably risky. Claimants with sufficient losses often achieve a more favorable result by filing an individual claim rather than participating in the class.