They are built like mutual funds, but act like hedge funds, and few investors seem to know what to make of them. That may change next month, when Morningstar launches a new rankings list to help investors better track hedge-like mutual funds. Industry insiders say the new list might help such funds gain market traction. Indices that track traditional mutual funds do not work well for those that mimic hedge funds. More than regular mutual funds, hedge-like mutual funds aim to return money regardless of what happens in the stock market overall. But in the name of making some money, hedge-like mutual funds sometimes miss out on big market upswings in order to avoid major drops. They are also more expensive to operate, difficult to explain and therefore tough to sell. But this might change once investors are given a reliable measuring stick.
(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.