A few weeks ago the Financial Industry Regulatory Authority rang an alarm bell regarding the burgeoning alternative mutual fund asset class in hopes that the average retail investor will do their homework before diving into these funds.

According to FINRA, in addition to the usual market and investment specific risks mutual funds have, alternative mutual funds carry additional risks from the strategies they use. For example, market-neutral funds tend to have significant portfolio turnover risk that can result in higher costs. Similarly, a distressed bond fund is likely to have significant credit risk.

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