Asset Management Partners Discuss Liquidity Risk Management Rule and Compliance in BoardIQ and Ignites

A June 18 article published by BoardIQ discusses how a small complex liquidated just days after provisions of the liquidity risk management rule became effective. The piece, titled “With Liquidity Rule Now in Effect, Small Complex Liquidates” includes remarks from asset management partner Jeremy Smith. The situation highlights what can happen when just one position in a highly focused portfolio runs into liquidity problems. “That’s a risk of running a concentrated fund,” Mr. Smith said. “It can very significantly affect the fund.” 

A separate piece in Ignites reviews how Securities and Exchange Commission examiners are looking at whether firms are complying with the requirements of the liquidity rule. The article published on July 1, titled “SEC Examiners On the Hunt for Liquidity Rule Stragglers,” includes insights from asset management partner Brian McCabe. 

After verifying that shops have surpassed the basic “compliance markers,” the SEC will probably turn its attention to vendor oversight, says Mr. McCabe. “I think what staff are going to want to know is that these firms haven’t completely turned the keys over to an outside vendor for bucketing and never look over their shoulder” to learn how the service provider classifies securities, and assess the accuracy of its work. He added that many shops have outsourced a large chunk of bucketing work because they lack the resources. “You can have over $1 billion in assets and still feel pretty darn small,” he said.