Investment funds are overestimating the liquidity of their holdings to cope with a rush to the exit, the Bank of England (BoE) and the Financial Conduct Authority (FCA) warn in a survey into open ended funds.
The regulators are reviewing the way open-ended funds operate with regards to liquidity in the wake of the high-profile collapse of Neil Woodford's fund. Several property funds were forced to suspend withdrawals due to Brexit and the pandemic, with longer redemption periods now inevitable. Managers of some of these funds considered a large proportion of their holdings to be liquid in almost all market conditions, and most funds considered the majority of their holdings to have 'high valuation certainty'. However, liquidity conditions for corporate bonds, particularly in times of ma...
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