Regulators need to go back to fundamentals on fund risks

Policy-makers need to identify risks posed by open-ended investment funds more precisely

risk assessment

The March 2020 market turmoil breathed new life into concerns about the systemic risks posed by open-ended funds. Such funds, which have grown substantially in the past decade, saw heavy redemptions that put pressure on the liquidity of some markets.

Central banks continue to worry about the liquidity mismatch to which open-ended funds give rise – that is, the difference between funds’ (mostly daily) redemption terms and the time it takes to sell illiquid assets in stressed market conditions.

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