Infinity Q Capital Management Founder May Have Incorrectly Valued Certain Fund Assets
The US Securities and Exchange Commission (SEC) has approved the suspension of redemptions on the $1.8B Infinity Q Diversified Alpha Investor Fund (IQDAX). This includes postponing redemption date payments past seven days.
The move comes in the wake of allegations that Infinity Q Capital Management CIO and founder, James Velissaris, may have placed the incorrect value on certain complex derivatives in the open-ended mutual fund.
The company stated that once it discerns the proper value for its swap contracts (which make up about 18% of the alternative strategy fund assets, liquidation, and distribution plans for its shareholders), it will be constructed and presented to the SEC for approval. Velissaris has been placed on leave in light of the portfolio management fraud allegations.
According to the most current portfolio report submitted to the SEC, the Diversified Value Fund had swap contracts with a $449M fair value. That was the equivalent to about 25% of its then $1.71B NAV. Bloomberg reports that included in this were variance swap contracts written by Wall Street banks tied to the global market benchmarks and their volatility.
The investment fund uses what is referred to as alternative investment strategies, such as betting against stocks and volatility. It also is supposed to be able to redeem its shares at net asset value (NAV) after every business day.
Investors May Have Received Incorrect Valuations
Earlier this month, the SEC notified Infinity Q Capital Management that it has proof Velissaris had been modifying the parameters of the pricing models utilized to value derivatives, including swap contracts, in the Infinity Q Diversified Alpha Investor Fund’s portfolio. This likely caused investors to receive incorrect valuations.
Velissaris, a former Wildcat Capital Management portfolio manager, established Infinity Q in 2014. Billionaire investor David Bonderman invested $2M in the money management firm and is also an investor in its funds. Wildcat Capital Management is Bonderman’s $3B family office.
Now, Leonard Potter, the non-executive chairman of Infinity Q Capital Management and president of Wildcat Capital Management, will take over managing Infinity Q.
In June, Velissaris told Institutional Investor in an email that another fund, the Infinity Q Volatility Alpha Fund, had made gains during the first quarter of 2020 even as other volatility funds experienced steep drops.
Now, one can’t help look at those claims and wonder about their accuracy. Institutional Investor, also reports that in 2019, the Texas Municipal Retirement System allocated $125M to the volatility alpha fund. Last year, the State Teachers Retirement System of Ohio listed Infinity Q Capital Management as one of its investment managers.
Experienced Alternative Investment Fraud Law Firm
If you are an investor in Infinity Q Capital Management’s IQDAX fund or Infinity Q Diversified Alpha Fund Institutional Class (NASDAQ: IQDNX), you may have grounds for filing a securities claim.
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent retail investors, including retirees and other senior investors, and institutional investors in recovering their investment losses caused by broker fraud or negligence. Call us at (800) 259-9010 or contact us online today.