How I Lost Money in LJM P&G Fund

February 6, 2018 is a day that I will remember for the rest of my life. I had investments in the LJM Preservation and Growth fund. This mutual fund totaled more than $770 million at its peak. On February 5, the share price dropped a full 55% from $9.67 a share to $4.27. The fund failed to report this loss, so none of the investors were aware. The next day, the fund dropped from $4.27 to $1.94 per share, another 54% drop, and a full 80% decline in just two days. I was devastated. Some analysts believe it to be the most dramatic two-day decline of any mutual fund ever.

Well, how could this have happened? On website, you’ll see some photos of someone hiking up snow-capped mountains. The website has an online brochure with the tagline “make volatility your asset.” It goes on to claim “investors commonly associate market volatility with uncertainty. But volatility can be harnessed to target a return stream uncorrelated with the equity and fixed-income markets.”

As is with actual mountain climbing, the reality of the situation was much more treacherous than advertised. This fund worked by selling naked put options on S&P 500 futures. Its borrowing levels were well about the average margin, and it was leveraged. Put options are essentially a contract that makes it possible for buyers to sell their securities at an agreed upon price. This is going to be the price they’re purchasing at. Buyers can then basically hedge an entire position or a portfolio or funds. In the worst case scenario where the price of the option falls below the strike price, at least the buyer can make some money on the options. When a lender writes put options to buyers, the lender is making a bet that the price will remain higher than the option’s price. When sellers do not own the securities of which it is writing options, this is known as naked option writing. This sort of writing comes with almost unlimited downside risk potential.

S&P 500 option prices are partly dependent upon market volatility. So by investing in LJM Preservation and Growth, my money was in a fund that was betting the market would remain stable. This is known among fund managers as shorting volatility. Unfortunately, the volatility index spiked severely in those days. It more than doubled, going from 17 to 37 on its index. This is what caused LJM P&G to fail. It was a gamble that proved disastrous.

This fund was managed incredibly poorly, to say the least. The fund managers operated with utmost negligence towards the wellbeing of its investors. Luckily, there are LJM Capital Preservation and Growth Fund lawyers that work to recover losses made from this fund. If you lost money by investing in this fund, you may be able to recover all or part of them by contacting the attorneys at Erez Law.

Regain Control of your Financial Future through Chapter 7 Bankruptcy

A sudden major change in one’s financial situation due probably to loss of job or the need to pay child and/or spousal support can be financially crippling, especially if you are paying a mortgage, credit card bills and others bills on top of monthly utility charges. This is a very common scenario involving thousands of American wage earners, who end up being faced with overwhelming debts.

A debt crisis is a major stress, and unless one finds an acceptable way of rising up from surmounting debts, this crisis will continually haunt the person through phone calls at home at the most inconvenient hour of the day or at the office demanding to speak with you to ask you to pay your debts, emails and text messages, and letters from collection firms warning you of the possible lawsuit you can be faced with if you do not start paying immediately.

Those are just some of the harassing tactics employed by creditors, collection firms and agents to make you pay. Scary and embarrassing, definitely! Yet, this proved effective, at least before, when many never knew that there are legal ways that will not only save them from the debts, but which will also put a stop to all forms of harassment; one of these is through Bankruptcy.

Bankruptcy is a legal declaration (either by an individual or by a business firm) of the inability to further pay debts that have worsened to an unmanageable amount. It is one of the legal means that will help individuals (and businesses) rise up from debts and regain control over their finances.

There are different chapters in the Bankruptcy law, each designed to address the specific needs and financial situation of the individual. With the help of a knowledgeable and experienced bankruptcy lawyer, one can effectively assess his/her financial situation and choose the right bankruptcy chapter that can erase some of his/her debts (dischargeable debts, such as personal loans, credit card bills and medical bills which the court may release you from) and render paying the non-dischargeable ones (like alimony, child support, student loans, court fines, and mortgage) in a more affordable scheme.

One particular bankruptcy chapter that a person may be advised to file is Chapter 7. Chapter 7 of the Bankruptcy law can immediately stop all forms of harassment and save the person from all debts to enable him/her to start a new financial life.

Chapter 7, which is a liquidation bankruptcy, is best for people who own a business or who have properties, but whose salary or income falls below this chapter’s stipulated limit. While the court may erase the person’s dischargeable debts, the liquidation of some of his/her properties would be required in order to pay the non-dischargeable loans.

After a court-appointed trustee sells the properties that the debtor is willing to give up, he will then distribute the amount earned to the creditors in payment of the debts; whatever remains from the amount will be returned to the debtor.

Before qualifying for Chapter 7 bankruptcy, however, the applicants will need to take a means test to ensure that his/her income is not above the limit prescribed by this chapter. The business owned by the debtor (if he/she runs a business) may also be required to discontinue operations (unless otherwise decided by the appointed trustee) as the company’s assets will need to be sold.