Mutual fund families routinely, and on purpose, use the capital in affiliated funds as “insurance pools” to offset or prevent cash shortfalls in other funds within family, according to research released by the Kelley School of Business at Indiana University.
This practice sacrifices the performance of the affiliated fund of the mutual fund, or AFoMF. However, according to the research, it is not outlined in prospectuses and may be in direct conflict with the shareholder interest of these funds.
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