Daily dealing with limited liquid securities can endanger the market
On the 07.15.19 at 4:45PM
Fitch Ratings’ analysis of Europe’s five largest UCITS high-yield bond funds, with combined assets of €43bn at the end of March 2019, revealed that all these funds offer daily liquidity but their holdings of highly liquid securities were limited, indicating significant liquidity risk. On average, only 4% of their investments were in cash and only 14% in instruments rated ‘A’ or above, with ‘AAA’ instruments having the lowest allocation.
Alastair Sewell - Senior director in the fund and AM team - Fitch Ratings
Alastair Sewell, senior director in the fund and AM team at Fitch Ratings, highlights the dangers of offering high liquidity while investing in less-liquid securities.