Asset liquidity is one of the focal points for industry magazine Global Custodian, as it sums up the trends it sees in asset management ahead of 2020.
Just how open-ended is open-ended?
As Global Custodian lights a New Year firework of post-trade trend spotting articles, the one on asset management is but one. And even within it, the ability of funds to transform holdings into cash under strain is only one of many aspects discussed.
That said, it could be an increasingly important one. Fears of a highly turbulent Brexit have subdued throughout 2019. But the suspension of redemptions to investors by Britain’s Woodford investment fund (and subsequent suspension of trading in a property fund with manager M&G) has highlighted the risk that investors can not get their money out when they want it.
FCA is watching
“The Financial Conduct Authority (FCA) and Bank of England have since said property funds ought to impose penalties on investors seeking daily redemptions, adding all open-ended products should offer redemption terms that correlate with the liquidity of the assets in the portfolio,” Global Custodian writes.
“This comes amid fears that mass withdrawals could lead to contagion or even systemic risks. Even though a blanket ban on retail investment in illiquids is doubtful, it is possible that managers might now have to disclose more information about fund liquidity.”
Other asset management trends mentioned in the overview include sustainability, digital assets, some persevering Brexit issues, and the cost pressure posed by passive and automated fund management solutions. All in all, staying alive through 2020 is an outcome that could be worth wishing for.