Oil and gas funds invest a substantial portion of fund assets in common stock of companies engaged in activities primarily related to the energy industry. Funds may invest in companies conducting oil exploration or providing services necessary for oil and gas extraction and distribution. Funds may also invest in companies involved in the production or transmission of energy or the production of components necessary for extraction.
In recent years, funds focused on investments in oil and gas companies were marketed to investors as safe high-yield investments that were unlikely to be affected by fluctuating energy prices. However, oil and gas funds did not perform as promised. As the price of oil collapsed from more than $100 a barrel to less than $30 a barrel, investors have faced crushing losses. Investors misled by false promises of safe high-yield investments may now be unable to recoup their initial investment without an unprecedented jump in oil prices. Investors who have suffered financial losses due to poor fund performance and bad investment advice should consult an investment fraud lawyer for help.
Oil and Gas Funds Over-Promised and Under-Delivered
Oil and gas investment funds were marketed by major brokerage firms with the promise of significant profits. Many of these funds tracked the Dow Jones U.S. Oil & Gas Index, or invested in companies whose primary operations included production, distribution, and exploration of natural gas or oil. These non-diversified funds were touted by financial professionals as “Black Gold” and investors were enticed into believing the funds were a safe investment perfect for retirees and others seeking high-yields with minimal risk.
Unfortunately, oil and gas companies are volatile investments which have underperformed according to U.S. and broader global indexes. Funds with investments heavily concentrated in companies within the energy sector have proved vulnerable to the drop in oil prices, despite assurances that major energy companies had enough cash on hand to avoid an impact by market volatility.
Investors who purchased non-diversified oil and gas funds upon the advice of financial advisors may have a legal claim based on unsuitability, sales practice violations, or excessive risk, among other grounds. Investors should not have to pay the price if financial advisors and brokers oversold the benefits of oil and gas funds while failing to disclose the danger that a drop in energy prices could result in plummeting fund values.
Recover Your Losses from Oil and Gas Fund Investments
If you invested in oil and gas funds on the advice of a financial professional, it is important to understand your options. Oil and gas funds reeling from a flailing market are unlikely to recover in the near future as it is unclear if oil prices have hit bottom. If you are seeking to recover your investment losses, it is wise to seek help from a legal professional to make a claim against the financial advisor or broker who recommended the investment.
Zamansky LLC has extensive experience representing clients who were harmed by inappropriate financial advice offered by trusted professionals. Contact us today to learn more about how we can assist in a claim for compensation.