The LJM Preservation and Growth Fund (LJMIX, LJMAX, LJMCX) is facing allegations that it made false and misleading statements to investors. In particular, the fund represented that it was appropriate for capital preservation investors who wanted conservative growth of their account. In reality, the mutual fund exposed investors to high risks that made them vulnerable to massive losses when it lost nearly all of its value within two days, dropping more than 80% earlier this month. In a filing with securities regulators, The LJM Partners, LTD., which is based in Chicago, announced that it was shuttering operations by March 29 and is going into liquidation.
The latest earnings report for the fund, filed at the end of October, noted $768 million of net assets. Reuters reports that the fund’s net assets were $812 million at the start of month but that is now reduced to $14 million. After this massive drop, the fund announced that it would no longer be open to new investments. Soon after, investors brought a class action securities lawsuit against the mutual fund. The plaintiffs are alleging that the LJM Preservation and Growth Fund violated the Securities Act and misled them by claiming it was committed to “preserve capital, particularly in down market.”
LJM, operated by Anthony Caine and Anish Parvatanen, was among a number of companies involved in selling liquid alternative funds that were complex and came with high fees. Investors that sought these funds out were generally hoping to enhance their returns even while reducing the risks. However, the fund did not accomplish that goal. It instead embarked on a risky strategy involving complex options trading and other investments that are not appropriate for any investor seeking capital preservation.