California Securities Fraud Attorney Call Today 800-699-1881
California Securities Fraud Lawyer Firm Overview Attorney Profiles Recoveries Obtained Frequently Asked Questions Testimonials Contact Us
information center
Attorney Advertising Disclaimer
Securities
Broker Misrepresentation
Brokerage Firms Sued
FINRA
Structured Products
Hedge Fund Losses
Recognizing Investment Losses
Recovery of Investment Loss
Securities Arbitration
Reverse Convertible
Misconduct
Securities Fraud
Securities Mediation
Securities Litigation
Stock/ Investment Losses
Suitability/ Unsuitability
Unauthorized Trading
Common Claims
Products
Frequently Asked Questions
Attorney Referrals
Video Center
securities fraud blog
legal blog Click here for a free case evaluation. Read our Articles on Securities Related Issues here. have a question resources
contact us
Name:
Email:
Phone:
Are you a new client?
Message:
10 Avvo avvo badge
If you need help recovering your losses contact us today. View our complete list of brokerage firms and banks we've sued.

FINRA Investor Alert: Alternative Mutual Funds Can Carry Added Risks

FINRA issued an industry-wide alert to investors regarding alternative mutual funds, which are separate and distinct from what FINRA describes as "typical" mutual funds.

Alternative mutual funds are publicly offered, SEC-registered funds that differ from "typical" mutual funds by deviating from the traditional buy-and-hold strategy often employed in the mutual fund industry.

Accordingly, alternative mutual funds are generally more complex than their "typical" counterparts and involve greater "non-traditional" investments and trading strategies, such as commodities, leveraged loans, global real estate, start-up companies and unlisted securities.

As such, the performance of alternative funds may be more sporadic than "typical" mutual funds and might engage in riskier behaviors, such as hedging and leveraging through derivates, short selling and "opportunistic" investing, such as raising capital for an unproven start-up company.

Under the Investment Company Act of 1940, alternate mutual funds, albeit risky, are subject to diversification requirements and limits on leveraging and illiquid investments.

FINRA recommends the following pre-investment strategies in regards to alt funds. Before investing, you should consider:

>> Diversity, as an alternative mutual fund may offer greater diversification than a "typical" single- or multi-strategy fund, which FINRA cautions may lead to a flattening rate of return with potentially less transparency.

>> Risk Factors, such as the added risk related to opportunistic investing or portfolio turnover risk (with corresponding higher fees and expenses) that may be associated with market-neutral funds and complex investment strategies.

>> Your Objectives, compared to investment objectives associated with an alt fund. For instance, a complex alt fund's performance may not necessarily be tied to the same market variables that would be at play with a "typical" mutual fund, as in the case of an alt fund tied to the performance of distressed companies, which may be more dependent on compounding variables, such as management expertise or commodities exposure.

>> Costs, Fees and Expenses, as the percentage of cost associated with alt funds—commonly hovering around 1.5 percent per year—may be pricier than expenses associated with "typical" or traditional mutual funds.

>> The Alt Fund's Track Record. Since many alternative funds are "opportunistic," fresh or simply new, performance histories may be limited; this limited track record plays into the alt funds' greater complexity, as compared to a traditional fund.

Finally, as always, FINRA recommends taking the time to research your fund manager using tools such as FINRA's BrokerCheck.

If you have invested with any broker or firm selling alternative mutual funds and these complex products have proven harmful to your investments or financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

FINRA Investor Alert: Alternative Funds are not your Typical Mutual Funds (FINRA)

accolades
The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
Located at 12711 Ventura Boulevard, Suite #440 Studio City, CA 91604. View Map
Phone: (800) 699-1881 | Local Phone: (818) 760-9880.
Website: