After reading this post on active vs passive. I was thinking... wouldn't shorting a mutual fund and going long the bench marked index(via ETF) create a positive alpha? Especially with the high MER/trailer fees on some of these mutual funds. Why isn't shorting mutual funds possible to try to depress mutual funds' high MER/trailer fees? A quick google search shows these arguments on not being able to short mutual funds. To bypass this, Is it possible for brokerages to get together and create a short inventory for mutual funds? Would this allow for mutual funds to be shorted?
The only caveat I see is that mutual funds have to be traded at the end of the day and there can't be any intraday adjustments. Additionally, they do take some time to settle. Some brokerages may be affiliated with financial institutions that create and sell these mutual funds. This wouldn't work on mutual funds with loads.
Submitted February 19, 2017 at 12:57PM by alwaysbullish http://ift.tt/2la4RjY
