Northfield Hospital & Clinics could lose $400,000 in investments after allegations that a New York firm overstated the value of mutual funds and forced the company to liquidate nearly $500 million in assets.
The investments, discussed during an April 29 Hospital Board meeting, were with Infinity Q Capital Management. NH+C’s investment advisor, Johnson Financial Group, manages a portfolio of the hospital's investments, including $1.6 million with Infinity Q. Of that, Chief Financial Officer Scott Edin said he expects the health system to recoup at least $1.2 million.
Any additional losses could be recouped in a class action lawsuit. NH+C investment revenue is generated from operations.
According to the international news organization Reuters, Infinity Q was forced to liquidate its mutual funds after the SEC found that its chief investment officer, James Velissaris, who has since been placed on administrative leave, “made potentially unreasonable adjustments to a pricing model used to value fund investments.” Edin said Infinity Q management valued the fund at $1.7 billion; however, the SEC liquidation netted only $1.25 billion. He expects investors, including Northfield Hospital and Clinics, to learn how the remaining funds will be distributed by summer.
“This is a very small percentage of NH+C investments — less than 0.6% of NH+C’s total investment portfolio,” Edin said. “That portfolio includes a wide variety of investments including CDs, government bonds and equities. The benefits of having a diverse portfolio is to spread assets across vehicles to balance the performance of individual investments and manage risk.”
Infinity Q said in January that it managed $3 billion in assets. According to Reuters, Velissaris’ attorney, Sean Hecker, has said the change in value reflected the mutual fund’s forced liquidation and denied his client had 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 in the Reuters article.
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. Infinity Q is also reportedly analyzing potential legal claims against its service providers.
Those valuation issues also extend to the company's main hedge fund, Infinity Q Volatility Alpha Fund LP, which is also being liquidated. That fund managed $760 million as of March 31, according to a regulatory filing, but the post liquidation cash value was unclear.
CORRECTIONS: A previous edition of this article incorrectly stated the status of the SEC investigation. The investigation is still ongoing. Also, it misstated the status of Velissaris’ employment. He is on administrative leave.