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Catalyst Hedged Futures Strategy Fund

Period: Nov 1, 2014 to Apr 28, 2017

Lead Plaintiff Deadline: Jun 27, 2017

Summary of Case:

A securities class action has been filed against Catalyst Hedged Futures Strategy Fund on behalf of all persons who purchased Class A, Class C and Class I shares of the Catalyst Hedged Futures Strategy Fund ("Catalyst Futures Fund" or the "Fund") between November 1, 2014 through April 28, 2017.  This case has been filed in the USDC - New York (Eastern).

The Complaint alleges as follows: In August 2013, the Fund was converted from a hedge fund to a mutual fund, which allowed Catalyst Advisors to raise capital for the Fund from ordinary retail investors and the general public. While hedge funds are generally limited to high net-worth individuals and institutional investors who are presumed to be more sophisticated in analyzing investment strategies and risks, mutual funds are much more extensively regulated to limit the amount of risk mutual funds can take on and provide enhanced registration and disclosure obligations.

Furthermore, after the Catalyst Futures Fund was reorganized as a mutual fund, defendants marketed and sold shares of the Fund as a low-risk, low-volatility investment with minimal correlation to the U.S. equity market. The Prospectuses for the Fund stated that the Fund places a strong focus on risk management that is intended to provide consistency of returns and to mitigate the extent of losses.... The Fund employs strict risk management procedures to adjust portfolio exposure as necessitated by changing market conditions. The complaint alleges that these statements and others like them in the Fund's Prospectuses and Registration Statements issued in connection with the offerings of Fund shares were inaccurate statements of material fact because they did not disclose that the Catalyst Futures Fund continued to invest as if it were a hedge fund, taking massive directional bets against U.S. stock market indices through complex derivative instruments, thereby exposing investors to the heightened risk of loss of capital.

 

Then, in February 2017, the Catalyst Futures Fund experienced a sudden drop in the net asset value ("NAV") of Fund shares, with the Fund losing $600 million in value in a matter of days. Between February 2 and February 15, 2017, the NAV for the Fund's Class A shares fell from $10.59 per share to $8.98 per share, a decline of more than 15%. Around this same time, several media organizations began reporting on the erosion in Fund value, characterizing the loss as a "melt-down" and stating that the Fund was "blowing up." According to the complaint, it was eventually revealed that the Catalyst Futures Fund had taken out massive option contracts that effectively "shorted" Standard & Poor's 500, meaning that the Fund had made a directional bet that the general equity market would not rise significantly in value. As the market rallied around the time these options were set to expire in mid-February 2017, the Fund experienced rapidly accelerating losses, as it had little time for the market to reverse itself and for the bet to return to profitability. As these undisclosed risks materialized, the Fund's investors suffered hundreds of millions of dollars in losses, with the value of Fund assets plummeting over $1 billion since the beginning of 2017. Between February 2, 2017 and March 15, 2017, the NAV of the Fund's Class A shares, Class C shares and Class I shares has declined approximately 21%, or $2.22 per share, $2.16 per share and $2.23 per share, respectively.

If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.

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