Insights / 26 November 2020

Fund industry warns regulators against knee-jerk reaction 

Michael Johnson

Speaking with Amie Keeley from Ignites Europe, Michael Johnson, Group Head of Fund Services at Crestbridge, featured in an article which discussed the potential of a “knee-jerk” reaction over liquidity rules following the pandemic.   

Michael explained that “any regulation applied universally, rather than selectively, could unnecessarily include certain fund types for which these liquidity risks aren't relevant”, pointing out that “many alternative investment funds [...] are designed to be closed-ended and illiquid”.   

The article goes on to explore how regulators have also called on fund houses to be more honest with investors about liquidity limits, as well as difficulties that can arise from trying to retrieve cash from investments in illiquid assets.  

On this topic, Michael states that any liquidity management tools should be clearly disclosed in a fund’s offering documentation. Although, he adds, “It's debatable [whether] more specific regulation on liquidity terms is necessary […] Such regulation would add to the ever-increasing regulatory burden placed on asset managers, which would ultimately increase costs to investors.” 

Read the full article here (paywall):