F-Squared Investments Filesfor Bankruptcy
From the Desk of Jim Eccleston at Eccleston Law LLC:
F-Squared Investments Inc. has filed for bankruptcy. F-Squared had claimed that its rules-based strategy could avoid violent market swings — by opportunistically trading in and out of nine industrial-sector ETFs. That pitch appealed to advisers stung by the 2008 free-fall of stock markets. The firm built itself from a virtual nonentity in 2008 to the force behind a $28.5 billion strategy, as of June 2014.
Those assets have fallen significantly: The firm saw nearly $8 billion in asset declines in its ETF strategies in the year ended March 31, 2015. The mutual fund distributor Virtus Investment Partners Inc. also cut F-Squared as a manager on five of its products with some $5.7 billion in assets, including Virtus Premium Alpha Sector.
F-Squared, its mutual-fund distribution partner and financial advisors who recommended the investment are under the microscope. At least one broker-dealer, Wells Fargo Advisors, currently faces investor loss recovery claims in arbitration.
Broadmeadow Capital, which is affiliated with F-Squared rival Good Harbor Financial, is petitioning the bankruptcy court to take over the remaining assets.
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