Regulatory Safeguards

Alternative mutual funds are subject to a wide variety of regulatory requirements, based on principles of investor protection.

Independent Custody
  • Mutual funds are required to use independent bank custodians
  • Assets must be held in segregated accounts
  • Short selling is implemented through tri-party agreements (rather than with a prime broker)
Leverage Limitations
  • Regulations strictly limit leverage or borrowing
  • The use of derivatives is subject to a variety of limitations
Liquidity & Daily Pricing
  • Mutual funds normally allow daily subscriptions and daily redemptions
  • Daily fair pricing of all assets is required
  • Use of illiquid securities is strictly limited [Note: the underlying funds in the LASSO portfolio rarely invest, and only to a limited degree, in illiquid securities]
  • Unlike hedge funds, mutual funds rarely charge an incentive fee