Supertanker funds and liquidity

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Dear Fund Director,

I have found this article about the liquidity risk in supertanker funds.

I think Mr. Beckett opinion is worthy to be considered when we follow up our funds and the funds where we are invested.

Taken directly from the article find interesting paragraph:

Using the AIFMD as a template we can start to ask specific due diligence questions to assess the liquidity risk of big funds such as:

  1. Outline any illiquid, non-daily priced or low volume assets held and how you manage these positions (eg direct property, unlisted stocks).
  2. What is the maximum size (capacity) of your strategy?
  3. Have you stress-tested the current portfolio, the liquidity profile of your investors or subjected the strategy to liquidity scenarios?
  4. What is the maximum percentage of the fund’s assets held by a single client and the ratio of retail to institutional clients?
  5. What has been the largest weekly and monthly outflow from your fund and what percentage of the fund did this constitute?
  6. Indicate your current liquidity ladder at normal prevailing prices – how much of the fund you can liquidate in one day, two days, seven days, 30 days, 90 days.
  7. Are there any sub-sectors where you own more than 10% of that market? Also detail the smallest market and holding (market capitalisation) you are prepared to hold.
  8. What redemption policies (eg unit cancellation, equalisation, dilution levy, swing-pricing) can you currently employ?
  9. Provide details of the liquidity of your portfolio, including the type of cash instruments held, trading liquidity of other assets and how quickly 75% of the portfolio can be traded out.
  10. Highlight and describe any holdings held currently (or previously) in the following: Gold bullion, Commodities, Exchange traded commodities, Traded endowment plans, Milk quotas, Contracts for differences, Direct property, Infrastructure, Cash held for margin requirements, Complex derivatives (eg OTC, non-vanilla Swaps, Swaptions), Unlisted securities (inc private equity, private loans).

I hope this helps.

Yours faithfully ,

The Indeep Fund Director


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