Saturday 25th April 2015
NEWS TICKER: FRIDAY, APRIL 24th 2015:Luc Luyet, CIIA – Senior Market Analyst AT Swissquote says that yesterday, “the SNB surprised the market by announcing that the number of sight deposit account holders that are exempt from negative interest has been reduced. This decision doesn’t change much the domestic banks’ situation as the “20 times the minimum reserve requirement” rule is still running. On the other side, the institutions associated with the Confederation, such as the pension fund of the Confederation or the pension fund of the SNB, are no longer exempt of negative interest. Consequently, only the account holders of the national social security system are still fully exempt.” - High yield debt issuance remains buoyant. Issuance volume for the week ending April 17, 2015, slowed down a bit from the previous week, but remained strong. Junk bond, or high-yield debt, issuers continued to issue bonds as yields remained favourable. High-yield debt is tracked by the SPDR Barclays Capital High Yield Bond ETF and the iShares iBoxx $ High Yield Corporate Bond Fund. According to data from S&P Capital IQ/LCD, dollar-denominated bonds amounting to $10.75bn were issued across 16 transactions in the week ending April 17th. The issuance volume fell by 3.2% from the week ending April 10. Pricing was evenly spread across the week. The number of transactions fell from 18 to 16 week-over-week. Last week brought the total US dollar issuance of high-yield debt to $115.8bn in 2015 YTD, up some 15% from the same period in 2014, the bulk of which is refinancing of older debt - Moody's says EMEA auto ABS performance remained stable during the three-month period ending February 2015. The sector's average performance trend was positive in terms of delinquency ratios and cumulative losses. The 60+ day delinquencies decreased to 0.66% in February 2015 from 0.77% in February 2014, while cumulative defaults decreased to 1.06% from 1.20% over the same period. This decrease was due mainly to the good performance of the German and Dutch markets. The prepayment rate increased slightly to 13.49% in February 2015 from 13.30% a year earlier. As of February 2015, the pool balance of all outstanding rated auto ABS transactions was €27.55bn - According to Sino specialists Red Pulse, China’s State Council is considering allowing daily repatriation for QFII. Currently, RQFII enjoys T+1 repatriation while QFII is restricted to T+5. QFII is the largest channel for foreign investment into China with quota of USD150bn, however, only half of the quota is in use, like at least partly due to the five-day repatriation stipulation - Malaysia’s state pension fund will offer a Shari’a-compliant investment option for its members by 2017, Prime Minister Datuk Seri Najib Razak said today. Najib says it will create the largest Shari’a fund of its kind in the world. Malaysia has one of the world’s largest Islamic finance sectors and the authorities are keen to develop it further. They envision the industry accounting for 40% of the country’s total banking assets by 2020 compared with latest figures of around 23% released last year. The $160bn (MYR577.4bn) Employees Provident Fund (EPF) already invests about a third of its portfolio in stocks and bonds that comply with Islamic principles, which ban interest payments and pure monetary speculation. The fund reportedly hired consultants last year to study the feasibility of a state-backed pension fund focusing entirely on Shari’a-compliant investments. Additionally, local press reports says that Malaysia’s sovereign wealth fund Khazanah Nasional has received regulatory approval to issue a MYR1billion (around $275m) socially responsible Islamic bond - The NASDAQ OMX Group, Inc has declared a regular quarterly dividend of $0.25 per share on the company's outstanding common stock, an increase of 67% from the prior $0.15 per share quarterly dividend. The dividend is payable on June 26TH 2015, to shareowners of record at the close of business on June 12TH 2015 - Lazard Ltd today reported operating revenue1 of $581m for the quarter ended March 31st. Adjusted net income was $103m, or $0.77 (diluted) per share for the quarter. These results exclude a pre-tax charge of $63m relating to a debt refinancing2. Q1 2015 net income on a U.S. GAAP basis, including the pre-tax charge, was $56m, or $0.42 (diluted) per share. "Our Financial Advisory and Asset Management businesses continue their strong performance," says Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "In the first quarter, we refinanced and repaid a portion of Lazard's long-term debt, significantly reducing our interest costs," adds Matthieu Bucaille, chief financial officer of Lazard. "Consistent with our capital management objectives, we have increased the quarterly dividend by 17%, the fifth increase in as many years." -

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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