Skip to main content

Use of Derivatives by Registered Investment Companies

Dec. 7, 2015

Daniel Deli, Paul Hanouna, Christof W. Stahel, Yue Tang and William Yost


Because granular, systematic information is not readily available on the extent to which investment companies registered under the Investment Company Act of 1940 (including open-end and closed-end funds, and business development companies) currently use derivatives in pursuing their investment strategies, the paper presents analyses of funds’ current derivatives use based on hand-collected information from Form N-CSR filed for 2014 for a stratified random sample of 10% of registered funds (a total of 1,188 funds).  The paper focuses on derivatives positions that implicate Section 18 of the Investment Company Act, along with information on financial commitment transactions and other transactions involving “senior securities.”  The paper finds, among other things, that while most funds use no or no substantial amount of derivatives, certain funds do use derivatives extensively.  Certain funds that make greater use of derivatives have received a disproportionately large share of fund inflows since the end of 2010.


Return to Top