Eat your broccoli.
That’s the lesson from this week’s stunning shutdown at Infinity Q Diversified Alpha Fund. It is a $1.8 billion mutual fund that looked like a star performer by investing in derivatives meant to buck market trends.
The Securities and Exchange Commission, which regulates mutual funds, is investigating how Infinity Q valued complex assets that were about 18% of the fund. The agency suspended redemptions on Feb. 22.
That means investors can’t withdraw money until the fund sorts out what its assets are worth. Ultimately, clients could lose 20% or more of their money, estimates one investor. Infinity Q declined to comment on that number.
While we won’t know for some time what exactly happened at the fund, one thing is clear. Infinity Q is the latest in a long line of magical money machines that have claimed they could produce attractive returns on unconventional assets at lower risk than mainstream portfolios.