The securities lawyers of Gana Weinstein LLP are investigating investor losses in FS Energy & Power Fund a business development company (BDC). According to the firm’s website, FS Energy is designed to provide income and growth. It invests primarily in the debt and, to a lesser extent, equity securities of private U.S. energy and power companies.
Because FS Energy in non-traded product there are no market pricing for the value of the securities. Secondary market sources for BDCs are currently pricing the BDC at $5.12 per share based on a tender offer. This is a far drop from the sale price of $10 per share when the BDC issued shares to investors.
Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors. In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.
According to studies, non-traded REITs and BDCs have historically have underperformed even safe benchmarks, like U.S. treasury bonds – meaning that non-traded products provide paltry investment returns considering the risk an investor takes. Alternative investment products like oil and gas partnerships, REITs, and equipment leasing programs are only suitable for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed at all.
However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. These products have become so popular among brokers without providing any benefit to investors that many states now limit investors from investing more than 10% of their liquid assets in BDCs. Many states impose these limitations because its understood that that they provide virtually no benefit to investors in relationship to their risks.
Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation.
The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.