Fitch Ratings: Credit funds' liquidity management is still not enough

Fitch Ratings has said bond managers' efforts to improve the liquidity profile of their funds are still insufficient to meet redemptions if investors begin rushing for the exit.

In a fresh warning on the issue, the agency said fund managers have been increasing their use of liquidity management techniques in response to market volatility, but their efforts may not be enough to fully protect portfolios. IMF warns on EM debt defaults and liquidity 'evaporation' when rates rise In its report entitled Credit Fund Risk Management in the New Now, Fitch Ratings pointed to the challenges of the intraday volatility of fixed income securities faced by credit fund managers in the current environment, which is leading to 'herd' behaviour from investors (see chart, below)....