Market Volatility Disrupts Fund Pricing


The historic volatility the markets saw at end of August not only rattled investors, it proved to be too much for the software used to price a number of funds and ETFs provided by some of the Wall Street’s biggest firms.

In a Wall Street Journal article, author Leslie Josephs outlines how a “software glitch” at fund administrator Bank of New York Mellon led to the publishing of incorrect asset values for a number of mutual funds and exchange-traded funds.

If you believe you were one of those people, Josephs suggests reaching out to your fund company and ask for a refund. While companies aren’t required to give you one, they may want to preserve long-term relationships with their clients.

The article adds that the type of fund you own may impact whether or not you will receive a refund. Mutual fund owners may have an easier time of it because they tend to be longer-term investors. In addition, mutual fund transactions are easier to track because “they’re executed once at the close,” according to Todd Rosenbluth, director of ETF and mutual fund research at S&P Capital IQ.

On the other hand, ETF holders may have shorter time horizons, since exchange-traded funds can be bought and sold throughout the day. This makes pricing them more difficult since the ETF price can diverge from the value of the underlying assets. The market volatility we saw a few weeks ago only served to exacerbate the problem. As a result, ETF investors may have a harder time getting a refund.

According to the article,  several exchange-traded fund providers, including Guggenheim Partners LLC, First Trust Advisors LP and Van Eck Global, said the net-asset values in some funds that were calculated as of the market close on Monday, August 24, contained errors greater than 1%.

The bottom line is, if you feel you overpaid for a mutual fund or ETF, you won’t receive a refund unless you ask for one.


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