$2 Billion Mutual Fund Drops 27% In Two Days, In Possible NAV ‘Catch-Down’
"A top-rated bond mutual fund was down 17% on Friday", Bloomberg's Lisa Abramowicz tweeted, on Sunday morning in New York. "In one day", she added, for emphasis.
The product in question is the AlphaCentric Income Opportunities fund which, according to the prospectus, "primarily focuses on non-agency residential mortgage-backed securities and other residential housing debt, although it can invest in other secured credits where management finds value".
As of February 29, it sported a five-star r
Sometimes it’s hard to find a bid, so you sell and the bid moves against you. They had to sell it seems.
Interesting. This seems to be a case where Closed End Funds are usefully more transparent than open mutual funds. Albeit they are no less impacted. NAVs and prices for bond CEFs have been dropping steadily throughout the crisis. For example, the popular Pimco multi-sector bond fund, PCI, is down similarly (about 35% 52-week chg), but it’s price decay started on Feb 25, in line with the real world. Similarly, one of Doubleline’s income CEFs, DSL has shown realistic NAV/price decay since the onset. So – perhaps this will lessen a bit the shock value as at least retirement investors should have been seeing NAV erosion clearly in a portion of their portfolios.
CEFs are pretty skinny piece of the pie, unfortunately, so not that visible.
With a 1.75% expense ratio in this environment, they are probably having to dump assets to meet redemptions.
The same thing is going on in the muni market, virtually no bid. In that environment, nav measurements are inexact since pricing is almost impossible. You will get these kinds of dislocations in open end traditional mutual funds, etfs, and lastly closed end funds. Closed end funds dont have to sell to meet redemptions unlike the other two, but may hit leverage caps,and then they may have to sell. When the underlying assets crater, there is no place to hide.
Why govt nit shutdown trading. Just seeing fun by loosing people money. It is too bad on govt statergy