According to Fitch Ratings, in an event of market stress, it is not determinable whether the focus that asset managers are placing on liquidity management would be sufficient enough to match redemption demands.
With broker dealers now being the provider of liquidity buffers and with the recent decline in liquidity in the fixed income markets, 80% of delegates at Fitch’s “The Changing Landscape of European Credit Markets” event viewed this as a systemic issue. The conclusion that the attendees came to revealed that an industry wide solution is necessary due to the majority of credit funds that let investors gain back their daily fund holdings.
Fitch explains how from September 2015, 96% of Undertakings for the Collective Investment of Transferable Securities (UCITS) corporate credit funds have provided liquidity daily, despite UCITS rules providing a minimum redemption frequency twice a week.
Alongside this, changes in regulatory framework could change how liquidity risk management operates, which is something that is being seen in the US, as the SEC has recently asked for new requirements for retail mutual funds.
The agency has seen a greater focus on making these techniques better because of market conditions that change because of volatility. These techniques may include position sizing and diversification rules limiting, but now fund managers use derivatives as a tool in order to change the profile of a fund.
Forecasts for 2016-2020 place Africa as the second fastest growing region in the world (at a compound annual growth rate (CAGR) of 4.3%), just below Emerging Asia.
A recent Gallup poll found that respondents identified the 'economy in general' as their biggest concern.
Sentiment in the financial services sector deteriorated in the three months to September, as firms digested the challenges of lower interest rates and the uncertainty caused by the vote to leave the European Union (EU), according to the latest CBI/PwC Financial Services Survey.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.