SEC weighs mutual fund pricing rule to protect long-term investors
Wall Street’s top regulator is seeking to change the way stock and bond mutual funds set their daily prices in order to protect buy-and-hold investors from having to bear the cost of rapid inflows or outflows, a move that would add expenses for asset managers.
Gary Gensler, chair of the US Securities and Exchange Commission, said in a statement that the proposal would “build resiliency” for US open-end funds, which faced a liquidity squeeze in March 2020 as investors scrambled to redeem shares at the start of the pandemic. “I think this would lower some systemic risk,” he said.
The SEC proposal would require US funds that together hold more than $16tn in assets to adopt so-called swing pricing, a practice common among European funds. Essentially, fund administrators must wait until they know exactly how much money has come in or out before calculating the daily “net asset value” (NAV). That way the cost to the fund of having to buy or sell securities during a volatile trading session can be included in the per-share price that departing and arriving customers receive.
This story originally appeared on: Financial Times - Author:Stefania Palma
