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  • Derf December 2015
  • msf December 2015
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  • Derf
    Yellen said the assets of Third Avenue were heavily invested in companies with high credit risk. Yahoo Finance recently revealed that $27 billion invested over 29 mutual funds may also be at risk, with two of them suffering larger losses than Third Avenue.
  • msf
    The Yahoo Finance article presenting these 29 funds,linked to in the original article, is here:
    http://finance.yahoo.com/news/why-the-current-credit-crisis-might-be-35-times-worse-than-you-thought-134706002.html

    Its video is okay (talking about junk bond pricing, energy sector), but the $27B and 29 funds are nonsense. The table is not one of funds with particularly high amounts of illiquid assets, but rather one of 10%+ draw downs in 2015.

    While many are bond (and notably high yield bond) funds, the list also includes funds like Victory CEMP US 500 Enhanced Volatility Weighted Index (CUHAX). That is not a mistake; M* reports a draw down of 10.39% between May 22 and Aug 25. (CEMP is the management company). This "at risk" fund's top holdings are such illiquid securities as Coke, Clorox, American Financial Group, Berkshire Hathaway B, Pepsi. Oh, and Yahoo seems to think this fund is Credit Suisse Global Health & Science.

    I'm not saying that perhaps many of the funds listed are at risk - just that this does not reflect a "revelation" by Yahoo, or much of anything, beyond an attention getting headline.

    Regarding Ms. Yellen's reported statement that the SEC is in the process of implementing measures to address the problem, the SEC put out a proposal months ago. Does "swing pricing" ring any bells here?

    Here's my exasperated critique of the initial press coverage of the SEC proposal:
    http://www.mutualfundobserver.com/discuss/discussion/23781/sec-wants-to-stem-liquidity-risk-of-open-end-funds-etfs

    and Prof. Snowball's subsequent fine presentation of the proposal:
    http://mutualfundobserver.com/discuss/discussion/23894/the-variable-impact-of-sec-s-proposed-liquidity-management-program

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