Liquidity: problems soon

Even pre-crisis liquidity was always going to be a big theme this year. An informal survey of directors undertaken by The NED over the last few weeks shows that many expect some of their funds will have problems as a result of the market crisis. But they also said that it is too early to say how extensive this will be.

Gatings are already on the rise. Fitch Ratings report that at least 76 European mutual funds suspended redemptions in March 2020 due to increased demand for withdrawals from investors. These funds had $40 billion of assets under management, say Fitch. ESMA reports that European based funds with €100 billion gated or applied other extraordinary liquidity measures in March.

Of the funds followed by Fitch the vast majority of gatings were driven by issues in pricing underlying securities across asset classes. Fitch says that there was even one case of an exchange-traded fund suspending trading due to pricing issues.

To read more on this story see the April issue of The NED.