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Hedge Funds Are Leaving Money on the Table

Hedge Funds Are Leaving Money on the Table – Securities Class Action Settlement monies are due to investors hurt by fraud – is your firm collecting what it is due?

Securities class action lawsuits are on the rise.  In 2008, 210 federal securities class action were filed, with a whopping 49% of these related to the subprime/liquidity crisis according to Cornerstone Research.  In 2008, 99 cases were settled, reflecting estimated damages of $1.5 billion.  That works out to roughly two cases being paid out to damaged investors per week.  Are you seeing that money? 

Securities class actions are typically initiated in order to recover for damages suffered by investors when a corporation or its management has misrepresented (or failed to disclose) important facts about the business or financial condition of the company.  As a result of these misrepresentations, investors incur damages and class action lawsuits are brought against the companies.

“We’ve found that many investment firms are not comfortable with the securities class action settlement process and are not filing for their share of settlement funds,” commented Mark Donaldson, Managing Director of Battea – Class Action Services, LLC.  “The complexity of the claims process combined with people’s beliefs that it is not worth filing or is somehow ‘ambulance chasing’ their investments has fueled firms’ not participating,” added Mr. Donaldson.  In fact, claims administrators are charged with distributing settlement funds to all investors included in the class. 

Hedge funds in particular are guilty of not filing.  Battea – Class Action Services, LLC serves 150 clients, many of them hedge funds, specializing in recovering the maximum settlement amounts due to clients through its proprietary Claims Engine technology.  For the past 10 years, Battea has fine-tuned its proprietary algorithms to efficiently process client trading data and accurately determine the damages incurred in each case.  The damages, known in the business as “Recognized Loss”, are key to Battea’s service.  All claims administrators determine a firm’s loss according to the rules defined in the settlement’s “Plan of Allocation” documents.  Battea programs these rules directly into its algorithm so not only do they never miss a case that a client is eligible for, but they know the exact amount clients are entitled to once a case’s proration is determined.  “We are a full-service outsourcing solution.  We take the entire process out of the client’s hands, following each case through the entire litigation, settlement and pay-out phases, all with no up-front costs to the client.  Our fees are performance-based which works particularly well for our hedge funds clients as they understand the value proposition of paying for performance,” added Mr. Donaldson. 

For many hedge funds, this is found money, and in this environment, that is quite attractive.  Buyside firms typically don’t have the resources internally to effectively file the complex claim forms and deal with deficiencies from claims administrators, and a lot of money gets lost in the shuffle.  When firms are watching their dimes, the ability to limit overhead and add revenue is welcomed with open arms. 

“Prior to going with Battea, they provided us, at no cost, with a customized ‘Proof of Concept,’ a report detailing our recognized loss calculations for the class action filings they would make on our behalf.  As soon as we signed with them, they filed our claims immediately.  We are confident that we will see increased operational efficiencies and, hopefully, higher settlement payouts for the benefit of our investors as a result of their service,” commented Mark Polemeni, Chief Legal and Chief Compliance Officer of Alexandra Investment Management, LLC, a New York-based hedge fund.  

For a free analysis of your firm’s class action settlement eligible filings, please contact:

Jennifer Carberry: jcarberry@battea.com
Tel: 203-987-4949

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