One of the most common forms of
hedge fund fraud has to do with the suitability of an investment for the investor
in question and whether the significant risks associated with this type
of investment have been disclosed to the client. Unfortunately, some financial
professionals may attempt to convince unwary investors that a hedge fund
is “completely safe” or “risk free” in order to
line their own pockets.
It’s important to understand that all investments come with some
element of risk, especially those that offer high returns. Here are just
a few examples of
why hedge funds may be risky for some investors:
Hedge funds can be complicated and are not always transparent. Hedge funds may use speculative investment strategies, and the actual companies
invested in may not always be known to the investor.
Hedge funds are only minimally regulated. Hedge funds are not required to register with the SEC and lack the regulatory
oversight that other investments are subjected to.
Hedge fund managers get paid even if investors don’t. Because of the way hedge fund managers are paid, it is possible for them
to make money when investors don’t – meaning the person making
investment decisions for the hedge fund is likely far more tolerant to
risk than the investors involved.
Some hedge fund risks are difficult to measure.Because hedge funds look at long-term performance and often involve illiquid
or volatile investments, the value and performance of the fund may be
hard to gauge.
If you believe you have been the victim of
stockbroker fraud related to a hedge fund, don’t wait until it’s too late to
pursue the recovery of your losses. Reach out to a friendly and knowledgeable
investment fraud attorney with Meyer Wilson today. You can reach us by
phone or email to schedule a completely free and confidential consultation,
or you can fill out the online contact form on this page for more information.
You can learn more about hedge funds by watching our helpful video.