F-Squared Investments filed for bankruptcy protection Wednesday, capping the rise-and-fall story of the exchange-traded fund manager.
The firm filed documents seeking Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.
In a statement, Broadmeadow Capital, a subsidiary of Cedar Capital, said it had "signed an agreement to acquire the intellectual property, investment strategies and investment management contracts of F-Squared Investments," if such a deal is approved by the court.
F-Squared agreed in December to pay $35 million to settle charges by the Securities and Exchange Commission that it made false claims about the performance of its flagship investment product.
According to the company's settlement with the SEC, F-Squared routinely promoted seven years of pre-2008 results for its AlphaSector strategy, despite launching the product that year. The results were hypothetical and miscalculated in a way that made them look more favorable.
F-Squared's claim that its rules-based strategy could sidestep violent market swings — by opportunistically trading in and out of nine industrial-sector ETFs — appealed to advisers stung by the 2008 free-fall of stock markets. The firm built itself from a virtual non-entity in 2008 to the force behind a $28.5 billion strategy, as of June 2014.
Those assets have fallen significantly. The firm saw nearly $8 billion in asset declines in its ETF strategies in the year ended March 31, Morningstar said. The mutual fund distributor Virtus Investment Partners also cut F-Squared as a manager on five of its products with some $5.7 billion in assets, including Virtus Premium AlphaSector. The firm cut a quarter of its workforce in March.
F-Squared officials were not available for comment.
