alleryStart learning →Why can mutual funds suffer a 'cash drag'?
AThey hold extra cash for redemptions
BThey are barred from buying equities
CThey may never hold any bonds at all
DThey can invest only in gold bullion
Answer & Solution
Correct answer: A. They hold extra cash for redemptions
Cash kept aside to pay redeeming investors earns less than invested assets, which lowers overall returns.
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