Understanding Leverage Cases
“Leverage” is another word for borrowing. Hedge funds frequently use leverage in an attempt to boost their returns. While leveraging may improve returns, borrowing to finance a fund’s investments increases volatility and can accelerate and increase losses. Leverage problems and resulting liability generally occur in two situations. First, when a fund does not properly disclose that it will use leverage as a part of its investment strategy, the fund can be liable for investor losses. Second, a fund can also be held responsible for losses when the fund violates internal limits on the use of leverage.
If you believe that you may have sustained financial losses as a result of leveraging actions, contact our hedge fund and securities fraud law firm today.