ETF and mutual fund liquidity present risks to investors

IMF argues redemption policy regulation should address illiquid assets

International Monetary Fund headquarters

Asset managers pose a threat to financial stability as a potential source of systemic risk, according to a report by the International Monetary Fund, while hedge funds may be at risk from investing in plain-vanilla vehicles.

The paper, released in April, says risks from segments of the industry including leveraged hedge funds are already widely recognised, and points in particular to the liquidity risks associated with plain-vanilla funds, calling for increased microprudential oversight from regu