Suppose you bought a mutual fund for $10 a share when it was really worth only $9, or sold it for $11 when it was actually worth $12. How would you feel? Cheated? Well, that kind of scenario can happen any time as more and more funds―especially those that invest abroad―use a method for pricing their shares called "fair value." The law has always permitted funds to estimate the "fair value" of securities in their portfolios when market quotes aren't readily available. That used to apply mainly to funds that invested in illiquid investments such as nonrated municipal bonds or bank loans. But two years ago, the Securities & Exchange Commission told mutual funds that invest in non-U. S. stocks that they could also use fair value. Since then, 75% of foreign fund managers, running some $3 trillion in total assets, have adopted fair value pricing, according to a recent survey conducted by accounting firm Deloitte & Touche.
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