EU high-yield funds at risk of liquidity shock – Esma

High-yield bond funds have just 13% of NAV in high-quality liquid assets on average

A stress test run by the European Securities and Markets Authority (Esma) found that high-yield bond funds are most likely to struggle to redeem investor shares in a market crisis.

Of 297 high-yield bond funds included in the test sample, 42.4%, representing 41% of net asset values (NAV), would not have enough liquid assets to cover outflows, assuming a redemption rate of 8.2% of NAV.

In contrast, only 3.6% of emerging market funds, 1.2% of global fixed-income funds, 0.5% of mixed-income funds

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