February 10, 2017 Comments (0) Blog

Fifth Street Finance Investment Losses

Cypress Income Fund VIII
(Last Updated On: July 31, 2017)

Concerned about investment losses in Fifth Street Finance?

Have you suffered losses investing in Fifth Street Finance? If so, The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that sold you  the investment.

Fifth Street Finance Corp. is a specialty finance company that lends to and invests in small and mid-sized companies in connection with an investment by private equity sponsors. According to their website, their investment objective is to maximize their portfolio’s total return by generating current income from debt investments and capital appreciation from equity investments. Fifth Street Finance is a Business Development Company.

A Business Development Company (“BDC”) is an investment company that invests in small and mid-sized businesses. Investors can buy shares in a BDC, and the money from their investments is used to fund the businesses. In turn, investors can profit from dividends paid on their investments, or, in some cases, the sale of their shares.

According to report from BDC Reporter, after the Q4 2016 earnings release, Fifth Street Finance announced to cut distributions which had a detrimental effect on their stock price. As of February 10, 2017 the stock has dropped further to an all-time low.

Risks of BDCs such as Fifth Street Finance

Like all investments, BDCs do not come without risks. Some of the risks of investing in BDCs are: limited liquidity, distributions that may not be guaranteed in frequency or amount, and limited operating history.

Business Development Companies can be a good investment for the right investor, along with a diversified portfolio and sufficient due diligence. BDCs should only be recommended to those investors who are able to both weather substantial losses and those who are not in need of immediate liquidity. Investors should be particularly cautious of riskier non-public and non-traded BDCs.

In addition, Fifth Street Capital has sponsored private placements to raise capital through the sale of equity or debt securities without having to register their securities with the SEC. These investments are often riskier and more complicated than traditional investments, and are only suitable for high net worth, sophisticated investors.

Despite the risks of investing in private placements, brokerage firms continue to push this type of investment because of the high commissions associated with their sale and creation.

The White Law Group is currently investigating the following Fifth Street Finance offerings, among others:

Fifth Street Mezzanine Partners III LP
Fifth Street Mezzanine Partners IV LP
Fifth Street Mezzanine Partners V LP
Fifth Street Credit Opportunities Fund LP
Fifth Street Opportunities Fund LP

If you invested in Fifth Street Finance and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.  For more information on the firm and its representation of investors, visit http://www.whitesecuritieslaw.com.