Hedge fund managers and other financial professionals often encourage wealthy investors who meet certain criteria to invest in hedge funds to maximize their returns while limiting their risks. Hedge fund managers will then pool money from several accredited investors and invest it in securities and other types of investments.
Investors often trust that their manager’s vision and out-of-the-box thinking will pay off in a big way.
Hedge funds can be susceptible to fraud
New York hedge fund managers must adhere to all investment regulations and act in the best interest of their investors. However, some managers engage in fraudulent conduct that causes harm to their investors. Hedge funds are often susceptible to fraud.
Managers may engage in fraudulent or negligent conduct by:
- Failing to disclose hedge fund risks to clients
- Mismanaging or embezzling funds
- Insider trading
- Recommending unsuitable funds for personal gain (e.g., higher commissions)
- Getting involved in Ponzi schemes
If you think you may be a victim of hedge fund fraud, look for the following signs:
- Long-term overperformance when markets are poor
- Bold/Unrealistic promises of excessive or consistent returns
- Lack of communication regarding your investment
If you are investing in a hedge fund, it is important to do your research in advance and consult with knowledgeable professionals to discuss your investment. Investors who have suffered financially due to potential hedge fund or securities fraud should consider consulting with an attorney as soon as possible.