The SEC economists found that 1 in 10 alternative funds had a month when outflows exceeded 10 percent of assets under management. By comparison, 1 in 10 of all mutual funds had a month when outflows exceeded 2.9 percent.
Underscoring how much more vulnerable alternative funds are to large withdrawals, 1 in 100 of them experienced a month when assets fell by 36 percent due to redemptions. Among all mutual funds, 1 in 100 had a month in which assets declined by 14.5 percent.
Investment Company Institute spokeswoman Rachel McTague said the trade group is still reviewing the SEC study. The ICI has disputed claims that mutual funds are susceptible to runs, citing data that shows a monthly outflow of more than 1 percent of industry assets isn’t common.
Alternative funds, a category that includes funds that aim to outperform in bear markets or during periods of rising interest rates, invest in stocks, bonds, asset-backed securities and derivatives. On average, these funds declined 1.3 percent this year, according to data from Morningstar Inc.
BlackRock, JPMorgan
Alternative funds on average hold more of their assets in cash than other types of funds -- 22.9 percent compared with 4.1 percent for mutual funds overall. But alternative funds also have the highest variation in how much cash they hold as a cushion, with a quarter of funds holding less than 3 percent of their assets in cash, the SEC economists found.
Some of the largest alternative funds, including the $31.6 billion BlackRock Strategic Income Opportunities Fund, have attracted more cash than they have lost over the past year.
The $19 billion JPMorgan Strategic Income Opportunities Fund, on the other hand, had more than $7.2 billion of outflows in the past 12 months, a period in which it had investment losses of 0.68 percent with dividends reinvested. The Standard & Poor’s 500 Index returned about 0.47 percent over the same period, with dividends reinvested.
JPMorgan spokeswoman Kristen Chambers declined to comment on the SEC study.
Liquidity Plans