Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Exclusive-New York's Infinity Q winds down hedge fund as valuation issues spread

EconomyApr 19, 2021 09:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door

By Lawrence Delevingne

BOSTON (Reuters) - New York investment firm Infinity Q Capital Management LLC is liquidating its hedge fund as the fallout from a U.S. regulatory probe into its valuation practices spreads, according to a person with knowledge of the matter.

The hedge fund wind-down, first reported by Reuters, may expand the Wall Street firm's client losses and spark further questions over who is to blame for the valuation problems first surfaced by the Securities and Exchange Commission (SEC).

Infinity Q, which is backed by private equity billionaire David Bonderman, said in January that it managed $3 billion in assets.

It was forced to liquidate its mutual funds after the SEC found that chief investment officer James Velissaris made potentially unreasonable adjustments to a pricing model used to value fund investments, according to an SEC February notice

The valuation issues also extend to the company's main hedge fund, Infinity Q Volatility Alpha Fund LP, which is now being liquidated too, according to the source.

That fund managed $760 million as of March 31, according to a regulatory filing, but the cash value post liquidation was unclear. Its investors include the State Teachers Retirement System of Ohio and the Texas Municipal Retirement System, according to public disclosures.

Meanwhile, the unwinding of the mutual fund Infinity Q Diversified Alpha Fund has so far showed cash of around $1.25 billion as of March 25, nearly $500 million less than on Feb. 18, according to a regulatory filing That makes it one of the largest valuation cases in the SEC's history.

Velissaris's attorney Sean Hecker said in a statement that the change in value reflected the mutual fund's forced liquidation and that his client had not misused the pricing tool.

"Any inquiry will determine James used these tools and others when determining appropriate valuations as part of his efforts to act in the best interests of investors," Hecker said.

A spokesman for the SEC declined to comment. Representatives for the above hedge fund investors did not provide comment.

While the SEC's February notice only flagged Velissaris's actions, attorneys said the case resurfaced longstanding questions over whether independent parties tasked with watching over funds' governance do enough to independently confirm portfolio pricing.

"It's really surprising that this was able to happen," said Paul Hastings attorney Vadim Avdeychik, adding complex securities should incur extra scrutiny from fund board directors and auditors.

"I think the SEC will definitely analyze the facts here and determine if there is an example to be made."


Infinity Q ran alternative strategies using complex derivatives. Velissaris told Institutional Investor in June that his portfolios gained in early 2020 even as other volatility funds dropped sharply. The flagship fund posted a 6.27% gain in 2020, nearly double the Morningstar Multialternative benchmark.

“As funds stretch for yield in more esoteric investments, the SEC is likely to make sure traditional valuation gatekeepers are keeping watch," said Michael Birnbaum, a former SEC attorney with Morrison & Foerster LLP.

An investor class action lawsuit filed by New York-based Rosen Law Firm alleges Infinity Q's mutual fund trustees made false or misleading claims about the portfolio’s value due to knowledge or "reckless disregard" of the mispricing.

Infinity Q is also analyzing potential legal claims against its service providers, its liquidators said on April 8, without naming them.

Auditor EisnerAmper LLP certified Infinity Q's mutual fund financial statements as recently as Oct. 29, 2020, which it said in a regulatory filing includes assessing "the risks of material misstatement of the financial statements, whether due to error or fraud."

EisnerAmper declined to comment. None of Infinity Q's trustees or directors would comment.

While independent third parties have responsibilities for making sure policies are followed, some industry experts said it was a stretch to hold them accountable in cases of deception.

“If someone has malicious intent, they aren’t telling the board. Absent significant additional facts, holding directors accountable for that fraud is unreasonable,” said Carolyn McPhillips, president of trade group Mutual Fund Directors Forum.

Exclusive-New York's Infinity Q winds down hedge fund as valuation issues spread

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email