The Mutual Fund Equivalent of Bankruptcy


Inside Third Avenue Management’s office.CreditFred R.Conrad/The New York Times

The recent decision by the managers of a fund invested mainly in high-yield, or junk, bonds to put their fund into the mutual fund equivalent of bankruptcy reminds us that mutual funds are like banks in an important way. Namely, both banks and mutual funds invest in long-term assets, yet promise short-term liquidity.

That basic mismatch makes runs on mutual funds a real possibility, particularly if the fund’s assets are not particularly liquid

The Mutual Fund Equivalent of Bankruptcy

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