Wednesday, August 13, 2014
Alternative mutual funds, with assets under management reported from $300-500 billion, mimic riskier investment strategies employed by hedge funds such as investing in commodities, private debt, shorting assets and complex derivatives. The trading strategies, as you can guess, are funded through higher fees charged to investors. The funds are touted as a new way for mainstream investors to diversify their assets. Forbes ran a great, short piece back in February describing the investment advantages and disadvantages of alternative mutual funds.
These alternative mutual funds are now in the cross hairs of the SEC and FINRA, the self-regulatory branch of the securities industries. FINRA issued an Investor Alert on "alt" funds in June, available here. The Wall Street Journal reported yesterday that the SEC will conduct a limited scope (15-20 funds) national sweep to identify fund oversight, ready assets, and disclosure of investment strategies. Included in the funds sweep are large investment firms such as BlackRock and AQR Capital Management, as well smaller firms that are new market entrants.