Hedge Funds

Hedge funds are private investment partnerships open to institutions and wealthy individual investors. These funds pursue returns through a number of alternative investment strategies.Those investment strategies might include holding both long and short positions, investing in derivatives, using arbitrage, and speculating on mergers and acquisitions. Some hedge funds use leverage, which means investing borrowed money to boost returns.

Most hedge fund investors do not obtain counsel to act on their behalf in connection with reviewing the offering documents or partnership agreement, or even with respect to conducting due diligence prior to making an investment.  This approach is strongly discouraged.

In recent years, investors learned that the partnership agreement contains provisions that could severely restrict their rights to the return of their investment funds.  For example, investors learned that their right to redeem could be severely restricted notwithstanding representations that the funds could be accessed on a quarterly basis. 

As another example, investors learned that the partnership agreement allowed the investment manager to make investments in highly illiquid securities or use substantial leverage with the hope of increasing returns notwithstanding the exponential risk to the investors.  There are a myriad of issues that must be understood prior to making an investment in a hedge fund.  Additionally, there are complex issues to consider if you have already invested in a hedge fund and the investment has turned sour.

If you are considering an investment into a hedge fund, or have already invested in a hedge fund, please contact Wittenberg Law to discuss your legal rights and options.