Editor's view: Why bond liquidity risk should still be top of investors' due diligence list

FCA published latest paper last week

The Financial Conduct Authority's (FCA) recent discussion paper on whether further 'regulatory intervention' is needed for open-ended funds investing in illiquid assets could not have been published at a better time, as liquidity risk continues to be a major concern for investors at the start of 2017.

While property fund liquidity dominated headlines last year and the asset class is included in the regulator's definition of 'illiquid assets' - alongside infrastructure and unlisted securities - in the background fund managers and investors have been worried about the deterioration in bond liquidity since the financial crisis, as investment banks have been forced to scale back their role as active buyers and sellers. US President Donald Trump's review of the Dodd-Frank banking reforms may loosen up some liquidity in this area if certain constraints are removed (although we are far away ...