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regtechpro
- Mar 18, 2019
- 1 min
Money Market Funds are special
A drop in asset prices can snowball into a full-fledged financial crisis. This true of any asset and many market. So, what is so special about Money Market Funds? Well, for one, it is not as if similar risks in sectors such as banking have been left unattended. There are regulatory efforts on about pro-cyclicality, concentration risks etc. in various sectors. And yet Money Market Funds have something specific by way of risk. The tightening of money markets is an early sign of
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regtechpro
- Mar 18, 2019
- 1 min
Be Aware of Concentration
Being aware of the nature of your investor and how concentrated the holding is among investors, is one of the implicit or explicit asks of the Money Market Fund Regulation. That is because redemption by a few investors of significant heft can cause a fund to sell assets to raise cash and meet the redemptions. But the resultant drop in asset prices can cause a conflagration and contagion which is what regulation seeks to control or limit. Let us to UCITS, commonly known as mut
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regtechpro
- Mar 18, 2019
- 2 min
Liquidity and Redemption Stress
Liquidity in normal circumstances and in stressed ones are at the core of the Money Market Fund Regulation. How much of the portfolio can be released to meet redemption requests? That is the central question. When initial apprehension sets in, the first phenomenon is a run on the Fund. That would be quite similar to a run on a bank. These “runs” can become full-fledged routs leading to contagion. Regulation has in many ways, across sectors, moved away from simply preventing f
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regtechpro
- Mar 14, 2019
- 3 min
Investor Concentration As A Stress
Imagine having a top-end investor in one of the Funds you run. Winning that account was a dream for the salesperson that aced it. Imagine that investor having a 100 million dollars in that Fund. Imagine that investor needing the money instantly. And if the name of the investor is Enron… You get the picture. A Fund Manager might instinctively realise the risk posed by that large investor. But it really is a Catch-22. Salesperson hunger for and hanker after such large clients.
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regtechpro
- Mar 14, 2019
- 2 min
The Canary in the Mine
It could be excessively high price earnings multiples. It could be increased credit spreads. It could be asset price inflation. And it usually is a combination of these and other factors – that might indicate trouble on the horizon. Contain contagion has become the mantra for Regulators. No one realistically thinks that the next financial crisis can be averted. But the next crisis should not flare up owing to financial linkages across sectors. That theme is seen across regula
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