Open-end funds must be able to meet their redemption obligations as and when they fall due. For daily dealing funds, this means being able to immediately sell a portion of the fund’s assets and meet investor redemptions within a three to four day settlement period.
Comprehensive liquidity monitoring needs to include consideration of:
- the liquidity profile of the assets (including regard to settlement timeframes); and
- investor dealing activity.
The regulatory requirements for liquidity risk management, monitoring and reporting have significantly increased in recent years, with new provisions in, for example, AIFMD, UCITS IV and also US SEC Rule 22e-4 on Liquidity Risk Management Programmes.
Funds-Axis Liquidity Risk Monitoring includes:
- Fund Liquidity Risk Assessment
- Detailed Fund Level Liquidity Reports
- Liquidity Analysis and Reporting
- Fund liquidity analysed into AIFMD Liquidity buckets and into the 4 SEC buckets of liquidity
- Analysis of fund liquidity and of investor subscriptions and redemptions
- Stressed Liquidity Monitoring
- Derivatives – Liquid cover monitoring
- Limit Monitoring
- Portfolio % in illiquid (restricted to max 15% NAV)
- Portfolio % a highly liquid investment minimum for the fund
- Portfolio % in any one liquidity bucket
- Portfolio – Average weighted Portfolio Liquidity
- Individual Holdings – Days to liquidate
- Time series reporting
- % in illiquid assets
- % in cash
- % in borrowing
- % in highly liquid assets