Anonymous
Anonymous asked in Business & FinanceInvesting · 3 weeks ago

What happens if everyone wants to withdraw money from mutual fund all at once?

Does the fund manager have to sell everything?

Update:

And does the fund value go to $0 now?

4 Answers

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  • 3 weeks ago

    Yes, although these funds usually have some restriction that in the case of a run on the fund, it has the right to take a few additional days or weeks to liquidate.

  • 3 weeks ago

    Yep, that's becoming a major concern of these S&P 500 Index funds. The Vanguard one alone represents 17% of the S&P 500 *** so if they have major outflows who is left to buy what they need to sell to pay out redemptions.

    *** I think that was the amount I read, but couldn't find the article again to confirm.

    The fund value would go to zero if everything they owned went to zero, which is highly unlikely baring a massive economically disastrous event (like so disastrous the value of your investments is the least of your concerns).

  • 3 weeks ago

    Well that's happened to me recently but unfortunately the fund manager bought too many illiquid assets and so couldn't meet demand forcing him to have to suspend trading whilst he tried to raise the capital to meet the withdrawal requests that were made before the decision to suspend.

    Now, four months later, the rest of us are told that the fund is being wound up and we'll be lucky to get half of our initial investment back. The fund manager has been fired and his name removed from the fund name but it is rumoured that he was collecting £65k per day in fees even during the suspension period.

    In your scenario much of the same would happen, trading would be suspended and assets sold off in order to meet shareholder demands for cashback.

  • Judy
    Lv 7
    3 weeks ago

    Yes that's what would happen, although chances are basically zero.

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