FINRA issued an investor alert regarding the "unique characteristics and risks" presented by "alternative funds." See http://op.bna.com/srlr.nsf/r?Open=rhil-98ktb8.
In a release, FINRA explained that "alt" mutual funds are United States Securities and Exchange Commission-registered and publicly offered, and hold "more non-traditional in-vestments and employ more complex trading strategies than traditional mutual funds." Alt funds, according to FINRA, invest in anything ranging from global real estate, commodities, and leveraged loans, to start-up companies and unlisted securities that offer exposure beyond traditional stocks, bonds and cash. These funds also might hold derivatives and employ a short- selling strategy, while some alt funds are structured to hold other alternative funds. This alert was to hopefully inform investors regarding these risks. Moreover, FINRA said those interested in investing in an alt fund should consider its investment structure, strategy risk factors, investment objectives, operating expenses, fund manager, and performance history.
These funds present risks unlike other fund investments, and FINRA is seeking to head off the problem.
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