Jeff Benjamin asks the age old question: Can regulators keep up with the increasingly complex financial instruments the industry creates? Or will they be forever left in the dust, struggling to catch up?
The short answer? Probably.
Alternative-class mutual funds have quadrupled to 399 over the past 10 years, Benjamin writes, bringing assets to almost $120 billion, up significantly from $15 billion in 2003, according to Morningstar data.
Benjamin interviewed Morningstar's Don Phillips
, who was quoted as saying, "Some of the oversight procedures set up for traditional mutual funds don't always work in the alternatives world…For instance, a fund might show some derivatives exposure along with 98 percent cash as collateral for derivatives, but the real impact of those derivatives might add up to a 100 percent footprint in a portfolio."
In other alternative fund news, George "Gus" Sauter
, senior consultant to Vanguard Group and former Vanguard
] CIO, says alternative funds aren't appropriate for most investors. Sauter was quoted as saying in a The Wall Street Journal
"The Experts" piece, "Alternative funds, such as hedge funds, are far more sexier than standard mutual funds…However, I don't believe they are appropriate for most investors. First, how will you identify the best funds or managers? while some alts have produced very impressive results, many have not."
Only in the fund industry could someone refer to alternative funds as " more sexier."
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