Fund Managers Are Incubating a Future Bond Market Crash
Asset managers need their regulators to help them resolve a liquidity mismatch.
What's liquid today can be illiquid tomorrow.
Photographer: Alastair Miller/Bloomberg
As the pandemic started to shake the global economy in March, liquidity rapidly dried up in the world’s fixed-income markets. Regulators have identified fund managers as the key protagonists in the petrification. To limit the repercussions of similar future dislocations, they should focus on the practice of allowing clients to withdraw their money on a daily basis as ripe for a fix.
It’s hardly the asset management industry’s fault it’s in this predicament. In the wake of the global financial crisis, the guardians of financial stability expended so much energy trying to make the banking system safer they may have simply shifted market risks elsewhere.