Monday 31st August 2015
NEWS: Friday, August 28TH: The Hong Kong Monetary Authority says it has granted a restricted banking licence to Goldman Sachs Asia Pacific Company Limited (GSAPCL) under the Banking Ordinance. GSAPCL, incorporated in Hong Kong, is a wholly-owned banking subsidiary of the Goldman Sachs Group, Inc. The number of restricted licence banks in Hong Kong is now 24 - Apple launched its first Australian dollar corporate bond issue, raising $1.2bn within two hours this morning. Strong demand for the US tech giant’s fixed and floating, four and seven year Kangaroo bonds saw the firm outstrip predictions it would raise between $500m and $1bn. Apple bonds are popular because the AA+ rated company is considered an ultra-safe investment, although yields are correspondingly low — about 3% on four-year bonds and about 3.8% on seven-year bonds - The European Securities and Markets Authority (ESMA) has published the responses received to the Joint Committee Discussion Paper on Key Information Document for PRIIPS. The responses can be downloaded from the regulator's website - Romania’s MV Petrom reportedly is planning a secondary listing on the London Stock Exchange. According to Romanian press reports, the local investment fund Fondul Proprietatea may sell a significant stake in the company via public offering on the Bucharest Stock Exchange and London Stock Exchange. OMV Petrom, with a current market capitalisation of €4.85bn has announced that it will ask its shareholders’ approval for a secondary listing in London. The general shareholders meeting is scheduled for September 22nd. Austrian group OMV, holds 51% of the company’s shares; other shareholders include the Romanian state, via the Energy Ministry, with a 20.6% stake, and investment fund Fondul Proprietatea, which holds 19%. The remaining 9.4% is free-float - Morgan Stanley (NYSE/MS) today announced the launch of a new fund, the IPM Systematic Macro UCITS Fund, under its FundLogic Alternatives plc umbrella. The fund provides exposure to IPM’s Systematic Macro strategy, which is based on IPM’s proprietary investment models that provide unique insights into how fundamental drivers interact with the dynamics of asset price returns. The FundLogic Alternatives Platform currently has more than $2.6bn in assets under management (as of 31 July 2015) and this latest addition expands Morgan Stanley’s offering of global macro strategies - Equities sold off hard this morning as continued pressure on Chinese stocks rippled throughout world markets. Chinese government intervention brought the Shanghai Composite back a positive close; but the question is now, has confidence eroded so much that the market will continue to depend on the government to prop it up? The other key element to consider today is the outcome of the debate in the German parliament on the Greek bailout. Last month, a record 65 lawmakers from the conservative camp broke ranks and refused to back negotiations on the bailout. The daily Bild estimated that up to 120 CDU and CSU members out of 311 might refuse to back the now-agreed deal. However, Chancellor Merkel is looking to secure support from the Social Democrats (SPD), Merkel's junior coalition partner, and the opposition Greens which will likely swing the final decision Greece’s way. However, a rebellion by a large number of her allies would be a blow to the highly popular Chancellor.

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IOSCO consults on liquidity risk management for collective investment schemes

Thursday, 26 April 2012
IOSCO consults on liquidity risk management for collective investment schemes The Technical Committee of the International Organisation of Securities Commissions has published the consultation report Principles of Liquidity Risk Management for Collective Investment Schemes, which outlines a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS).  http://www.ftseglobalmarkets.com/

The Technical Committee of the International Organisation of Securities Commissions has published the consultation report Principles of Liquidity Risk Management for Collective Investment Schemes, which outlines a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS). 

The Technical Committee of the International Organisation of Securities Commissions has outlined a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS).   

Since the outbreak of the global financial crisis, the issue of liquidity has been a major concern for regulators, although the discussions on regulatory reform have focused more on the importance of liquidity in the banking sector rather than in other sectors. However, the asset management sector has specificities to be kept in mind when setting policy recommendations.



 Good liquidity risk management is a key feature of the correct operation of a CIS, as the right to redeem units/shares is a defining characteristic of open-ended schemes. Liquidity risk management is complex and a CIS may experience liquidity issues as, for example, when the market in which it is invested closes unexpectedly. However, asset managers have regulatory and practical tools to manage liquidity both on the asset side and on the investor side.  In exceptional circumstances, a liquidity issue could lead to a CIS temporarily suspending all investor redemptions. IOSCO recently published the report Principles on Suspensions of Redemptions in Collective Investment Schemes addressing this issue.

The fundamental requirement of liquidity risk management is to ensure that the degree of liquidity that the open-ended CIS manages allows it in general to meet redemption obligations and other liabilities.  The principles of liquidity risk management provide details on how compliance with this requirement can be achieved. Generally, these principles aim to reflect a level of common approach and to be a practical guide for regulators and industry practitioners. Implementation of the principles may vary from jurisdiction to jurisdiction, depending on local circumstances and legal and regulatory structures.

The principles of liquidity risk management for CIS

 The principles of liquidity risk management for CIS are divided into two groups related to the life span of a CIS: the pre-launch and the day-to-day liquidity risk management. They include the following:

 Principle 1

The responsible entity should draw up an effective liquidity risk management process, compliant with local jurisdictional liquidity requirements

 Principle 2

The responsible entity should set appropriate liquidity limits which are proportionate to the redemption obligations and liabilities of the CIS

 Principle 3

The responsible entity should carefully determine a suitable dealing frequency for units in the CIS  

 Principle 4

Where permissible and appropriate for a particular CIS, and in the interests of investors, the responsible entity should include the ability to use specific tools or exceptional measures which could affect redemption rights in the CIS’s constitutional documents

 Principle 5

The responsible entity should consider liquidity aspects related to its proposed distribution channels

 Principle 6

The responsible entity should ensure that it will have access to, or can effectively estimate, relevant information for liquidity management

 Principle 7

The responsible entity should ensure that liquidity risk and its liquidity risk management process are effectively disclosed to prospective investors

 Principle 8

The responsible entity should effectively perform and maintain its liquidity risk management process

 Principle 9

The responsible entity’s liquidity risk management process must be supported by strong and effective governance

 Principle 10

The responsible entity should regularly assess the liquidity of the assets held in the portfolio

  Principle 11

The responsible entity should integrate liquidity management in investment decisions

Principle 12

The liquidity risk management process should facilitate the ability of the responsible entity to identify an emerging liquidity shortage before it occurs

 Principle 13

The responsible entity should be able to incorporate relevant data and factors into its liquidity risk management process in order to create a robust and holistic view of the possible risks

 Principle 14

The responsible entity should conduct assessments of liquidity in different scenarios, including stressed situations

 Principle 15

The responsible entity should ensure appropriate records are kept, and relevant disclosures made, relating to the performance of its liquidity risk management process

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