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Non-Tech : Derivatives: Darth Vader's Revenge
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To: robnhood who wrote (611)10/28/1998 6:24:00 PM
From: Enigma  Read Replies (3) of 2794
 
rrman - " an external source of redemption funding...." I take it you mean that MFs can use a line of credit as bridging for redemptions(sp)?. This is a very interesting observation. I'm not sure to what extent this is allowed under the funds' charters? Certainly funds in Canada would not be able to take out loans other than bridging ones - usually I think to bridge the time between a security sale and purchase (through different brokers - if the same broker they can use the broker's credit)

There is a URL somewhere which has a graph showing the average cash position of mutual funds - it has been declining steadily for years - the last time I found it it showed the astonishing cash figure of 3% - which certainly caused me to do a double take. I'm not sure where things stand now. A figure like this means that the majority of funds are or were fully invested. They would have to have lines of credit to meet redemptions. E
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