IMF Analyst: A Lot of Mutual Funds Could Collapse in a Panic

https://dailyalts.com/wp-content/uploads/2019/11/IMF_logo.png

The Woodford debacle is a wakeup call for the markets about illiquidity

International Monetary Fund analyst Laura Kodres warns that investors are putting too much faith in mutual funds. According to Deutsche Bank, half of the high-yield asset funds could experience liquidity shortfalls in a market panic.

Kodres’ notes that a lot of these funds own assets that could be very hard to move in the event of a market downturn.

“There is a sense in which retail investors should have some opportunity to take risks that were previously just the purview of high-net-worth individuals,” Kodres told MarketWatch this week. “To be fair, probably somewhere in the fund documents it says there is liquidity risk and redemptions are not guaranteed within 24 hours. But I’m not sure everyone has read that fine print as closely they should.”

International Monetary Fund Has Concerns

Kodres statement comes a day after Deutsche Bank released a report on the state of the mutual fund industry. The German bank’s chief economist Torsten Sløk released damning data on the state of these funds. “Half of funds with high-yield assets would face liquidity shortfalls if managers experience a repeat of the worst redemption shocks felt between 2000 to 2019,” Marketwatch writes.

The report indicates that 15% of fixed-income funds would experience similar liquidity challenges under the same stress test.

“Holders may not realize their requests are straining the fund’s abilities to liquidate assets, especially if a lot of holders want to redeem simultaneously,” Kodres said.

Related: Liquid Alternative ETFs on Institutional Shopping Lists

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2022/01/Bink-app-shot.png
FinTech: Lloyds To Acquire Stake In Loyalty App Bink
January 4, 2022     FinTech, News

Lloyds Banking Group (LON: LLOY), Britain’s biggest mortgage provider, will acquire a minority stake in loyalty app Bink, according to a report by Sky News for an undisclosed amount that…

https://dailyalts.com/wp-content/uploads/2022/01/Screenshot-2022-01-04-at-22-29-49-Screenshot-Pawson-2.png
Digital Assets: Coinbase CEO Armstrong Said To Have Splurged $133M On Home In LA
January 4, 2022     Digital Assets, News, Real Estate

An iconic property in Bel Air, Los Angeles, designed by internationally acclaimed English architect John Pawson changed hands last month for $133 million and the buyer was Coinbase (NASDAQ: COIN)…

https://dailyalts.com/wp-content/uploads/2022/01/47752022922_e4569a2f0e_c.jpg
Alternative Investments/ESG: VegTech Invest Launches Plant-Based Innovation & Climate ETF

VegTech Invest advisory has launched the VegTech Plant-based Innovation & Climate ETF (Ticker: EATV), its first financial product. The ETF offers exposure to publicly traded companies actively innovating with plants…

https://dailyalts.com/wp-content/uploads/2022/01/Screenshot-2022-01-04-at-18-48-26-超·世界.png
Venture Capital: Chinese AI Startup Parametrix Raises $100M, Turns Unicorn
January 4, 2022     Artificial Intelligence, News, Venture Capital

Chinese AI company Parametrix.ai has raised $100 million in a Series B round led by Sequoia China and joined by existing investors 5Y Capital and Gaorong Capital. Though the valuation…