by Jeff Thomas
International Man
The pending Brexit has, not surprisingly, caused a shake-up in the investment world, particularly in the UK. Of particular note is that, recently, asset management firms in Britain began refusing their clients the right to cash out of their mutual funds. Of the £35 billion invested in such funds, just under £20 billion has been affected.
For those readers who live in the UK, or are invested in UK mutual funds, this is reason to tremble at the knees.
So, why have these investors been refused the right to exit the funds? Well, it’s pretty simple. The trouble is that quite a few of them made the request at about the same time. Of course, the management firms don’t keep enough money on hand to pay them all off, so rather than spend all their money paying off as many clients as possible, then going out of business due to a lack of liquidity, they simply announce a freeze on redemptions.