The exams will shed light on how funds are trying to generate yield and how much risk they are taking, Jarcho said. The
“A lot of the managers brought in to run these funds come from the hedge-fund world where they weren’t used to these regulations,” Jarcho said. “Some boards of mutual funds don’t have a lot of experience with alternative-investment strategies.”
Alternative mutual funds typically invest beyond traditional stocks and bonds into asset classes like real estate and commodities, or may employ hedging techniques like short selling. They’ve jumped in popularity since the 2008 financial crisis as investors seek better returns.
The funds are among the fastest-growing segments of the
“I think this will accelerate,” Fink said on an
The BlackRock Strategic Income Opportunities Portfolio drew
Non-traditional bond funds invest in a wide variety of debt or have a strategy that aims to avoid losses, according to Morningstar. Multi-alternative funds take long and short positions in equity and debt, trade futures or use convertible arbitrage, the research firm said. Market-neutral funds aim to match long and short portfolios.
The SEC’s exams will run for about six months, Jarcho said. A second round of examinations could be needed, she said.
Mutual funds are regulated by the
The fund industry is facing scrutiny by the
The FSOC is examining whether it should designate some of the largest asset managers as systemically important, thus subjecting them to direct regulation by the Federal Reserve. Fund companies have objected, saying there is no basis for the designation and urging the
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