Ever since the Super SIV (structured investment vehicles) story broke last week, I've been seeing hints that mutual fund shareholders might be caught up in the mess and not even know it. Well it's true. I've found significant holdings in non-government backed collateralized mortgage and asset-back securities in a number of mutual funds. That means if you have a mutual fund with a security that does default, that mutual fund will have to write-down those assets and may have to lower the Net Asset Value (NAV, essentially the selling price) of your mutual fund.

I've found significant holdings in various types of bond funds, including Total Return Bond Funds, Short-Term Bond Funds and Ultra-Short Bond Funds. There are thousands of funds out there, so I can't guarantee I've located all the funds with possible problems, but I can tell you what to look for in any funds you hold.

If your funds hold primarily bonds graded lower than AAA, it's worth a closer look. Next, look at the mortgage and credit holdings of the fund. If your fund holds a significant amount of mortgage pass throughs, collateralized mortgage obligations (CMOs), commercial mortgage-backed securities (CMBS) or asset-back securities (ABS), these could be the types of securities that are now tied up in the Super SIV story. In order to know whether or not you have a problem, you would need to look at the actual portfolio holdings and find out exactly what is being held.

Continue reading Is your mutual fund caught up in the mortgage mess?

Is your mutual fund caught up in the mortgage mess? originally appeared on BloggingStocks on Mon, 22 Oct 2007 15:30:00 EST. Please see our terms for use of feeds.