FINRA issued an Investor Alert on June 11, 2013 to inform investors about mutual funds that invest in alternative assets such as such as global real estate, commodities, leveraged loans, start-up companies and unlisted securities (“alternative mutual funds”). The focus of the alert is to inform investors of the ways in which alternative mutual funds differ from those that invest in traditional stocks, bonds and cash. The alert explains that the strategies employed by alternative mutual funds may have additional risks than are present in strategies employed by traditional funds. For example, the alert states that market-neutral funds, which use long and short positions in stocks to generate returns, tend to have significant portfolio turnover risk that can result in higher costs and that distressed debt funds typically have significant credit risk. The alert also indicates that alternative mutual funds may have higher operating expenses relative to traditional funds. It also cautions that because a fair number of alternative mutual funds were launched after 2008 and have limited performance histories, “it is not known how they will perform in a down market.” Please click here for the full text of the alert.