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Punctuation can scare off investors more than actual assets!

Forget lengthy disclosures. There’s nothing like punctuation to ward off investors.

According to Bank of Israel research published Tuesday, the simple addition of an exclamation mark to the names of some mutual funds led to significant declines in net flows as retail investors grew warier. The bank calls it the “Exclamation Mark of Cain.”

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While conventional theories on decision-making hold that investment strategies should be made following rational analysis of qualities like risk, return, or fees, the research paper published Tuesday shows presentation can shape investment behavior.

Money managers poured $1.6 billion into the iShares 20+ Year Treasury Bond ETF (TLT), the most since September.
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 27, 2018. U.S. stocks were mixed as euphoria from better-than-forecast earnings reports faded with investors contemplating the implications of higher interest rates in an economy that may be cooling. Photographer: Michael Nagle/Bloomberg

The paper draws on a study of a 2010 Israel Securities Authority reform that required fund managers to add an exclamation mark to the names of mutual funds allowed to hold high-yield corporate bonds beyond their maximum exposure to equity investments. Only the risk salience was affected, not the fundamentals or information available.

However, the name change also created another impact.

Funds that added an exclamation mark boosted junk bond holdings significantly. “We leave
the further investigation of this behavior to future research,” the researchers wrote.