During the bull market of 2002 to 2007, investors and managers supported the creation of a number of large, open-end, value-added funds. The attractiveness of this format lay in its ability to provide investors with a platform for achieving higher returns while also providing the opportunity for liquidity. Through the downturn, many of these funds have grappled with fundamental issues of risk and capital structure as the unexpected events of the past year have roiled plans and disrupted expectations.

As investors assess recent fund performance and the potential of future investments, they should consider six major issues that pertain to the open-end fund structure: liquidity, alignment of interests, value-added exposure, valuation, capital management and risk exposure.

LIQUIDITY

Historically, open-end funds have been able to provide investor liquidity and satisfy redemption requests in all but the most severe market conditions, providing flexibility for investor