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Trustees, Adviser Named in Suit after Fund Collapses Amid Market Volatility

Shareholders of the LJM Preservation and Growth Fund recently filed a securities fraud class action lawsuit naming the fund adviser, portfolio managers, distributor and trustees as defendants. During the market volatility of early February, the fund’s NAV plunged from $9.82 on February 2, to $1.94 on February 7, a “massive loss of approximately 80%,” according to the complaint. The plaintiffs charge that defendants represented that the fund “aims to preserve capital, particularly in down markets (including major market drawdowns), through using put option spreads as a form of mitigation risk” in the fund’s registration statements and prospectuses. The complaint states that the fund was not focused on capital preservation and left investors exposed to an unacceptably high risk of catastrophic losses and that defendants violated the securities laws by failing to disclose that the fund had not taken appropriate steps to preserve capital in down markets, among other allegations. Several funds have been hard hit by the recent stock market volatility, including exchange-traded products. The Wall Street Journal reports that regulators are examining the fallout from two collapsed ETPs and talking with asset managers linked to these short volatility funds.