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NTXFY - Natixis Shows Once Again The Danger Of Open Ended Funds With Illiquid Holdings
Natixis SA ADR
Our Basic Problem
Open ended funds solve one problem for us, they maintain fund value to asset value over time. At least, in theory and in normal times they do. They also have a problem in one scenario. What if the liquidity being offered to investors is greater than that available in the underlying asset? At that point the fund value can seriously and significantly diverge from the asset value. There's even a gearing effect at work, meaning they can diverge much more than closed end funds.