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Time for the Market to Rethink Liquidity – Investor Daily

Full Article: Investor Daily

Institutional investors and asset managers may need to adjust the style of products they offer to their clients. For example, it may no longer be possible to offer daily liquidity to clients and redemption periods may need to be extended to weekly or monthly windows.

Comments
  • Wolfman
    WolfmanMay 26, 2016"Right on, Jester! This is required reading and hits all of the key points. Fixed Income ain't equities and the current product offering doesn't mimic retail-designed equity products. Yes, I know, ETFs can fit the bill, but they are not shares in a company, they are pools of inventory that are managed, for hidden creation and redemption fees, by the :owners" of the ETF. The market is evolving, yes, but it is not an evolution created by intelligent design. Rather, it is…"
  • Jester
    JesterMay 26, 2016"This article is REQUIRED READING for market participants. Why? It discusses the problem of liquidity without perception bias and admits the real challenges behind potential solutions. For example: “Electronic systems may make trading easier, but they are unlikely to add liquidity to a market unless the point above is addressed by all parties in the market (ie, the willingness to assist in providing liquidity rather than just being a passive participant).” AMEN. Many o…"
  • Hollywood
    HollywoodMay 26, 2016"The article lists many suggestions as to how the bond market will evolve and what can be done to mitigate lack of liquidity. Blackrock and others have proposed changes to market structure to improve liquidity. Nobody, however, is discussing how to educate the average retail investor or even “sophisticated investors” on the inherent risks of corporate bond funds. Many assume fixed income is safe and secure and, being in a fund…even better (diversification!)! However, f…"

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Hollywood
Member
The article lists many suggestions as to how the bond market will evolve and what can be done to mitigate lack of liquidity. Blackrock and others have proposed changes to market structure to improve liquidity. Nobody, however, is discussing how to educate the average retail investor or even “sophisticated investors” on the inherent risks of corporate bond funds. Many assume fixed income is safe and secure and, being in a fund…even better (diversification!)! However, fixed income Credit has added credit and interest rate risk. Furthermore, the market structure (less liquid, more fractured, and trades in larger size) lends itself to… Read more »
Jester
Member
This article is REQUIRED READING for market participants. Why? It discusses the problem of liquidity without perception bias and admits the real challenges behind potential solutions. For example: “Electronic systems may make trading easier, but they are unlikely to add liquidity to a market unless the point above is addressed by all parties in the market (ie, the willingness to assist in providing liquidity rather than just being a passive participant).” AMEN. Many of the new and incumbent platforms preach that they have an answer to the liquidity issue, but of course it can only be found through their system.… Read more »
Wolfman
Member
Right on, Jester! This is required reading and hits all of the key points. Fixed Income ain’t equities and the current product offering doesn’t mimic retail-designed equity products. Yes, I know, ETFs can fit the bill, but they are not shares in a company, they are pools of inventory that are managed, for hidden creation and redemption fees, by the :owners” of the ETF. The market is evolving, yes, but it is not an evolution created by intelligent design. Rather, it is a method to raise capital and has a structure designed to reward liquidity providers. If they cannot earn… Read more »
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