Behind the Mysterious Demise of a $1.7 Billion Mutual Fund

Link: https://www.wsj.com/articles/behind-the-mysterious-demise-of-a-1-7-billion-mutual-fund-11618911000

Excerpt:

U.S. mutual fund that suffered nearly $500 million of losses appears to have misvalued its large derivatives portfolio, according to an analysis of the fund’s disclosures by The Wall Street Journal, academics and traders.

The Infinity Q Diversified Alpha Fund disclosed in filings with the Securities and Exchange Commission valuations of investments that in at least three instances were incorrect or inconsistent with market conditions, said traders and academics. One valuation was mathematically impossible, said a former Morgan Stanley managing director who reviewed the disclosures.

In one instance, the disclosures show, Infinity entered two nearly identical swaps contracts referencing the same index over the same period, yet booked a gain on one that was more than three times as large as the other—an outcome analysts said defied logic. Swaps are bilateral contracts, brokered by banks, that traders use to bet on asset prices, interest rates or other financial trends.

Author(s): Gunjan Banerji

Publication Date: 20 April 2021

Publication Site: Wall Street Journal

The end of LIBOR to be anything but simple

Link: https://www.pionline.com/investing/end-libor-be-anything-simple

Graphic:

Excerpt:

LIBOR, which has been plagued by cases of bank manipulation, is set at different currencies, including the U.S. dollar, British pound sterling and euro. New LIBOR-based contracts will cease at the end of 2021, but in November, the Intercontinental Exchange Inc. announced that the ICE Benchmark Administration, which administers LIBOR, would explore ceasing the most utilized U.S. dollar LIBOR tenors in June 2023 instead of late 2021. On March 5, Britain’s Financial Conduct Authority confirmed the 2021 and 2023 cessation dates for LIBOR, although it retains the option for a synthetic calculation if needed.

The extension to June 2023 would allow more time for outstanding contracts to mature, thereby reducing the chance of potential disruptions, U.S. regulators said in a December statement.

But the majority of contracts extend beyond mid-2023.

Author(s): Brian Croce

Publication Date: 8 March 2021

Publication Site: Pensions & Investments