Last month it was great to see a number of key liquidity developments finally enter into force, including: ESMA’s new guidelines on liquidity stress testing in UCITS and AIFs, The FCA’s new rules for certain open-ended funds investing in inherently illiquid assets; and Article 37 MMF Reporting for both Q1 and Q2.
The 30 September compliance deadline is fast approaching for a number of liquidity developments. Including: ESMA’s new guidelines on liquidity stress testing in UCITS and AIFs. The FCA’s new rules for certain open-ended funds investing in inherently illiquid assets. FCA and Bank of England survey to review the liquidity mismatch in open ended funds Article 37 MMF Reporting for both Q1 and Q2.
This month marked one year since the collapse of Neil Woodford’s LF Woodford Equity Income fund. The Woodford fund was suspended in June, after it became overwhelmed by redemption requests from investors. One year on and investors are still awaiting their final pay-out. One year on and questions concerning the liquidity mismatches in open-ended funds still remain.
Fund liquidity problems witnessed in 2019 with Woodford and H2O Asset Management brought liquidity back into the spotlight. Since then, the focus hasn’t really faded on the issue of liquidity, and if anything, has intensified with the COVID-19 pandemic causing market volatility resulting in several more fund suspensions.
Although 2020 has already seen a number of initiatives intended to address liquidity risk, there are still more to come, with September due to be a particular busy month for risk management professionals.
Firms must have appropriate systems, controls and governance to oversee and manage liquidity risk. With the New Year well and truly underway, regulators across the globe have started publishing their priorities for the year ahead. Unsurprisingly, liquidity risk appears to be high up on most of their agendas