Post-Woodford, State Street has an idea on liquidity risk
You’ve heard of the liquidity coverage ratio. Try the ‘redemption coverage ratio’ for funds
In June, the £3.5 billion Woodford Equity Income Fund was suspended to avoid fire sales that would have been necessary to cover sudden, snowballing redemptions. The UK fund was loaded with barely traded, unlisted stocks that tied it up in knots when it had to come up with the cash.
Blame, responsibility and mutual accusation are being meted out. “These funds are built on a lie, which is you can have daily liquidity for assets that fundamentally aren’t liquid,” Bank of England governor Mark
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