The Financial Stability Board (FSB) revealed several policy recommendations aimed at addressing
"liquidity mismatches across investment funds" as part of
a wider paper dealing with structural vulnerabilities in the asset
management sector. These include further scrutiny on whether
certain asset classes are suitable for open-ended fund structures,
broadening the range of risk management tools available to fund
managers at times of market stress, and possibly strengthening
investor disclosure on liquidity issues. In particular, the FSB
recommended the IOSCO should further consider whether certain asset
classes and investments are fit for inclusion within an open-ended
fund structure, saying vehicles that offer daily liquidity should
invest primarily in liquid assets and have strict limits on their
investments in illiquid holdings. Moreover, the FSB suggested a
fund's liquidity profile should be managed and adjusted on an
ongoing basis to ensure its portfolio composition remains suitable
in light of redemption terms and conditions, the evolution of the
market environment, and investor behavior, among others.
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