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:
- Outline any illiquid, non-daily priced or low volume assets held and how you manage these positions (eg direct property, unlisted stocks).
- What is the maximum size (capacity) of your strategy?
- Have you stress-tested the current portfolio, the liquidity profile of your investors or subjected the strategy to liquidity scenarios?
- What is the maximum percentage of the fund’s assets held by a single client and the ratio of retail to institutional clients?
- What has been the largest weekly and monthly outflow from your fund and what percentage of the fund did this constitute?
- 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.
- 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.
- What redemption policies (eg unit cancellation, equalisation, dilution levy, swing-pricing) can you currently employ?
- 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.
- 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