New York (HedgeCo.net) – According to an arbitration claim filed by Florida law firms, Vernon Healy and Dovin Malkin & Ficke, GenSpring Family Offices failed to adequately diversify the $57 million portfolio of an ultra high net worth individuals and misrepresenting itself by saying that the hedge funds it recommended would perform like bonds.
The legal claim filed on behalf of a retired Florida entrepreneur seeks more than $11 million, including rescission of more than $6 million in hedge funds that are now illiquid that GenSpring represented would be “as safe as bonds with upside.” GenSpring also represented that the multi-strategy hedge funds would be far more liquid than they have turned out to be, according to the claim.
The Dovin Malkin & Ficken and Vernon Healy team are representing ultra high net worth individuals in an aggressive nationwide investigation of GenSpring Family Offices. The team previously filed an additional claim charging that GenSpring failed to diversify the $30 million portfolio of an ultra high net worth investor.
“These funds had a severe lack of transparency and control attributable to the fact that their multiple managers in the various sub funds could employ essentially any strategy they chose at any particular point in time. Thus, GenSpring could not adequately determine what strategies these managers were following, and whether these strategies provided ‘bond-like’ risk,” according to the claim filed today by the team led by securities fraud attorneys Chris Vernon and Ed Dovin.
The retired entrepreneur’s colleague, trained as a CPA, began raising concerns about the hedge funds in the investor’s portfolio in late 2007 and 2008, according to the claim. GenSpring repeatedly dismissed the concerns and sought to dissuade liquidation of the hedge funds by the investor, the claim asserts.
Prior to the financial crisis, the hedge funds with purportedly bond-like risk recommended by GenSpring were actually moving in lock step with equities and GenSpring was aware of that fact, according to the Vernon Healy and Dovin Malkin & Ficken claim.
“In truth, and contrary to its representations, GenSpring did not have a reasonable basis to believe that multi-strategy hedge funds would perform like bonds, provide diversification from equities or remain liquid in the event of a need to reallocate,” the claim states.
GenSpring Family Offices is owned, in part, by a wholly-owned subsidiary of SunTrust. GenSpring has stated it has more than $17 billion under management and its clients are among the wealthiest families in the world.
In addition, the Dovin legal team has already received a $1.3 million arbitration award — representing a win — against GenSpring in which the arbitrator found that GenSpring breached its fiduciary duty when it used hedge funds instead of bonds for much of the bond risk portion of that investor’s portfolio.