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Written by 10:34 am Blog, Securities Fraud Articles

Recovery of CAIS Paulson Fund Losses

The White Law Group is investigating the liability that brokerage firms may have for inappropriately recommending the CAIS Paulson Fund.

CAIS Funds provides independent advisors access to hedge fund managers.  The platform currently has 20 managers including Paulson & Co., Millennium Management, DE Shaw, Third Point, Highbridge, BlueCrest and Kingdon.

The CAIS Paulson Fund is a feeder fund that was recommended and sold by advisors with access to the CAIS platform to their brokerage customers to invest in the Paulson & Co. Advantage Fund. Unfortunately for investors, the CAIS Paulson Fund, like the Paulson Advantage Fund, appears to have suffered enormous losses as a result of exposure to gold (amid steep declines in gold prices) and Paulson’s previous bet on a sovereign default in Europe that did not occur.

The Paulson Advantage Fund is a hedge fund investment.  Hedge funds employ various complicated trading schemes in an effort to maximize returns.  These trading schemes involve risks which causes hedge fund returns to be extremely volatile.

As such, due to the high risk associated with the Paulson Advantage Fund, the investment is not suitable for everyone and is really only suitable for institutional investors or extremely high-net worth and sophisticated investors.

Brokerage firms are required to make recommendations that are appropriate for their clients in light of their clients’ particular age, income, net worth, investment experience, and investment objectives.  To the extent that a brokerage firm recommended the CAIS Paulson Fund inappropriately, they may be held responsible for any resulting losses in a FINRA arbitration claim.

According to reports, Morgan Stanley Smith Barney recommended that its financial advisors pull client money out of Paulson’s Advantage and Advantage Plus funds in December 2012, potentially because the firm became concerned with the level of risk to which their clients were being exposed.  This was far from the first warning sign though for Paulson Funds.  Reports in August 2011 indicated that one of Paulson’s two main funds was down more than 30 percent compared to a much smaller 6.1% decline for the average hedge fund during that same time period.

If you invested in the CAIS Paulson Fund and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.

Tags: , , , , , , , Last modified: July 17, 2015