Small investors may be allowed in on bank bailout

School of Management Professor Scott Stewart, an investment-management expert and former Fidelity funds manager, says the possibility of small investors being allowed to get in with the big hedge funds in investing in the banking bailout might be a disaster, but could work.

“To provide access to the little guy, you’d want a mutual fund or exchange-traded fund (ETF) format.  This requires providing liquidity.  Another approach would be offering a new closed-end fund, which doesn’t provide daily liquidity, or an ETF, which traditionally offers in-kind liquidity but couldn’t in this case.

“But with a mutual fund, even if half are in liquid investments, there’s the risk that many people will want out, but can’t get out.  This is typically associated with a significant drop in value.  And this could be a public relations disaster in the making.”

Contact Scott Stewart, 617-353-2353, sstewart@bu.edu

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