Conference nyoss1::market_investing

840.0. "Are mututal funds at risk?" by SOLVIT::CHEN () Mon Mar 06 1995 09:17

With the recent news about a British banker Leeson who single-handedly brought 
down one of England's oldest bank. Apparently he has done so by playing with 
derivatives. This has raised my concern for my mutual fund companies. 

Now, derivatives are nothing new to Wall Street and I know alot of mutual fund 
companies use them. If they are used correctly and responsibly, they can be 
very effective tools to hedge unexpected market activities. But, if they are 
used inresponsibly, the effect can be devastating (case in point). What is 
shocking to me is that a bank (or any organization) would put that much of a 
stake into one person's fate. Are we going to have similar kind of risk with 
our fund managers? What can we do as small investors. How can we find out how 
our mutual fund managers are using derivatives in the fund(s) he or she is 
managing? 

Mike