The continued squeeze on liquidity in the corporate bond market could lead to the closure of larger funds to investors and even cause parts of the corporate bond and gilt markets to shut down.
Concerns have surfaced as the FSA confirmed last week it has begun asking asset managers to supply the results of stress tests on corporate bond funds. It also wants information on internal liquidity and the time it would take to meet any potential redemptions. Meanwhile, fund managers have told Investment Week the liquidity shortfall is making them more mindful when selecting positions on fears of being unable to meet redemptions should a crisis evolve. Chris Bowie, manager of the £253m Ignis Corporate Bond fund, said: “There is definitely an issue for the whole market. Liquidity has...
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