Assessing Liquidity Risk in Investment Funds

Asset liquidity remains critical in mitigating adverse impacts from potentially large redemption pressures, which are common during periods of unfavourable market conditions. Recognising the need for an industry-wide assessment, the SC developed and conducted a series of macro stress tests on unit trust and wholesale funds (collectively referred to as investment funds). This aligns with the International Organization of Securities Commissions’1 (IOSCO) focus onassessing the liquidity characteristics of assets in relation to their anticipated redemption flows in stressed market conditions.

1Final Report: Recommendations for Liquidity Risk Management for Collective Investment Schemes. The Board of the IOSCO, IOSCO, 2018

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