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The fixed income liquidity challenge

Insights – September 2015

Foreword

 

Liquidity conditions have deteriorated across the fixed income markets this year and volatility has increased. Some investors are worried that bond funds could struggle to meet their redemption calls if there is a mass sell-off. Yet so far the problems appear contained. 

As one of the world’s largest managers of fixed income funds, we are well-placed to understand the risks involved. This report explains what is happening in the markets as well as the steps we have taken to ensure we continue to provide a consistent service in this potentially challenging liquidity environment. They include processes to monitor and manage liquidity risk across our investment strategies in case the situation deteriorates. 

Where there is risk, there is also opportunity. We offer a number of ways to take advantage of any increase in market volatility caused by the lack of liquidity. They include a market neutral liquidity strategy, which exploits temporary mispricing when liquidity evaporates. Meanwhile, our global volatility strategy provides an efficient way to seek performance in stressed market conditions.

Deteriorating liquidity conditions: challenges and opportunities for investors

BLANQUE Pascal , Group Chief Investment Officer
BRARD Eric , Head of Fixed Income

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The fixed income liquidity challenge
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