Vida Longevity Fund Investors May be Able to Recover Losses Through FINRA Arbitration or Litigation

Investors who were solicited to invest in the Vida Longevity Fund, LP (VLF, or the Fund) may be able to recover their investment losses through securities arbitration before FINRA, or through litigation, provided the brokerage firm or Registered Investment Adviser (RIA) did not perform adequate due diligence before recommending the Fund as an investment. Headquartered in Austin, Texas, VLF is a Delaware limited partnership that is structured as an open-ended hedge fund and was formed to “invest in senior life settlements and other longevity-contingent assets.”

Launched in 2010, VLF has been offered through a series of private placements by Vida Capital, LLC, which in turn is backed by Austin Ventures, a private equity firm based in Austin, Texas. As an alternative and relatively illiquid investment, VLF began suffering poor performance in 2018, and as of earlier this year, has continued to display a negative valuation trend. According to publicly available information, the Fund was supposed to offer investors an opportunity to earn a target annualized return of between 8-12%, with an ostensible focus on capital appreciation. In addition, the Fund was marketed as a largely uncorrelated investment, with respect to other asset classes and macroeconomic factors.

Through its hedge fund structure, investors in VLF may have acquired Class A, B, or C shares (with Class A and B shares now closed to new investors). Investors in Class A shares were required to invest a minimum of $500,000 with a 2-year lock, a 2% management fee, and a 5% performance fee. Investors in Class B shares were required to invest a minimum of $250,000 with a 3-year lock, a 1.5% management fee, and a 10% performance fee. Finally, investors in Class C shares were required to invest a minimum of $250,000 with a 2-year lock, a 1.75% management fee, a 4% hard hurdle, and a 15% performance fee.

FINRA-member broker-dealers, and by extension their affiliated financial advisors, must ensure that adequate due diligence is performed on any investment recommended to customers. In particular the duty to perform adequate due diligence is arguably more pronounced when recommending more esoteric and typically opaque alternative investments that are not registered with the SEC, and accordingly are offered via private placement. In fact, most hedge funds—including VLF—are offered to investors via private placement. Within this context, brokerage firms and their financial advisors must perform comprehensive due diligence, and moreover, conduct a suitability analysis to determine if the investment meets the customer’s stated investment objectives and risk profile. Either an unsuitable recommendation to invest in VLF, or a misrepresentation concerning the nature and risk components of the underlying investment, may give rise to a claim against a brokerage firm or a financial advisor.

The attorneys at Giarrusso Law Group LLC have considerable experience with complex and esoteric investments offered via private placement, including hedge funds and other unregistered vehicles specializing in life settlements, including viatical settlements. Investors may pursue a claim to recover their losses through FINRA arbitration, or in some instances, by litigation. Investors who wish to discuss a possible claim are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation.