Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Portfolio > Mutual Funds

John Hancock adds liquidity stress testing for mutual funds

By Marlene Y. Satter

X
Your article was successfully shared with the contacts you provided.

John Hancock Investments has announced that it is using a stress-testing tool to help assess the liquidity of securities held in its mutual fund portfolios.

The technology of the tool, LiquidityMetrics from MSCI, will allow the firm to stress test the liquidity of its funds, measure the potential impact of various market scenarios and evaluate potential transaction costs, liquidation time horizons, amounts available for liquidation, and other critical information.

In the wake of the financial crisis, the need for mutual funds to hold sufficient cash on hand in case of high redemptions became a priority.

Requirements for stress testing for fund companies, and the potential for some of them to have been classed as systemically important financial institutions (SIFIs), were under consideration by the SEC and other agencies.

Among agency concerns were whether mutual fund companies should be more highly regulated, particularly those that use leverage and derivatives to increase returns.

The LiquidityMetrics platform was introduced in 2013, when increasing regulatory controls were reducing the number of fixed-income market makers, leaving corporate bonds and other securities more vulnerable to liquidity shocks.

“The 2008 financial crisis and subsequent regulatory changes put a premium on identifying liquidity-related risks before they become a problem,” Andrew G. Arnott, president and CEO of John Hancock Investments, said in a statement. “However, until recently the technology available in our industry for analyzing those risks was imperfect and often limited to equities.”

Arnott added, “By adopting MSCI’s platform, our goal is to be best in class in terms of liquidity risk management and monitoring, with an even deeper understanding of the liquidity profile of our funds. We’re pleased to be an early adopter of this technology in the asset management industry. We think it’s the right thing to do for our shareholders.”

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.