Investorial

I recently read an update on Portus. It reported that investors who were victims of the hedge fund company’s malfeasance could recover more than the previously estimated $0.62 on the dollar. I’m happy that these investors may look forward to receiving more settlement, but this unfortunate incident should not have happened in the first place.

You can call me an investment cynic, but I think everything is a scam until I educate myself about it. Portus was a hedge fund company who sold invesments via an offering memorandum with the help of many invesment distribution channels. Investment advisors, mutual fund and insurance sales representative who referred should bear a lot of the responsibilities for their actions. So far only Manulife has really come to say that they will make restitution to clients referred to Portus through their network.

Why do I think these referrers should shoulder liability? Anytime you act in a capacity of a advisor/client relationship, you are bound to act in the best interests of your client. Fiduciary responsibilities completely flew out the window because the advisors’ greed to get a quick buck via Portus comissions. I feel that most advisors did not know enough about hedge funds and themselves were incompetent victims of the Portus sales pitch. Hedge funds are one of the more risky asset classes out there due to their trading activities. There is a good reason why they are not regulated as mutual funds. Investor accreditation was non-existent as a criteria as Portus and many advisors found ways to skirt by the issue. Not being educated themselves, these advisors led their clients down a dark tunnel of deceit and greed that is unparalleled in the history of the Canadian financial services industry.

My suggestion, be wary if your advisor keeps changing tunes every few years and seems to be interested in selling the “best performer” of the time. Better yet, educate yourself! Financial education is essential in this day and age. Don’t invest into anything that you do not understand. At the very least, I prefer investing in funds that are proven winners with a proven track record that is at least 10 years or older. Of course, past history does not reflect the future, but it offers more information than a fund with little or no history.

Overall, I am very happy of the media coverage during this scandal. This is not a case of chicken little screaming that the sky is falling. It was a timely revealation before more hedge fund companies like Portus sprung up. I feel the story was 50% about the company’s wrong doings and 50% about the disregard for the clients’ benefits by the distribution channels. If you could be a fly on the wall while a group of brokers and advisors discuss about their business and clientele, you would know what I mean!

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