THE LATEST INDUSTRY TRENDS, NEWS, REGULATIONS AND EVENTS SURROUNDING RISK MANAGEMENT.
Arkus Financial Services would like to thank ALFI – Association of the Luxembourg Fund Industry, for hosting yesterday yet another great European Risk Management Conference. We were delighted to not only sponsor the event but partake in it, with our Chief Risk Officer Mr. Martin Ewen sharing his views alongside a panel of risk management experts and professionals on the practical considerations of liquidity risk modeling and stress testing.
Industry regulators and independent bodies have continuously stressed the importance of investment funds embracing a robust liquidity risk management framework and policy, not only to conform to the respective guidelines but to ensure industry best practises are adopted.
At Arkus, we have worked on providing a cost-effective liquidity risk reporting solution through our online risk monitoring platform, RiskRadar.
Among other drivers, the startling rise in household energy bills, which includes 18% in gas and 28% in electricity, have elevated the UK inflation rate to 4.2%, which is more than double the Bank of England’s target. This higher than desired inflation rate, compounded with a very robust jobs report this week, has elevated the pressure for the BoE to consider hiking rates in their next monetary policy meeting, which is due to take place in under a month. As a result, investors have jumped on the possibility of a rate hike, strengthening the pound against other major currencies such as the dollar.
November Edition Available: HERE
An interactive online platform that manages and monitors portfolio risk for a variety of UCITS/AIF fund structures and investment strategies.
At Arkus, we continually participate in some of the leading Asset Management events in Europe, speaking and hosting panels on areas surrounding our expertise field, Risk Management.
Equity markets remain unimpressed by persistent global supply chain issues, rising energy prices and the FED signaling a potential end to tapering. Looking at the still unresolved tension between the US, China, and Russia, further distress might be on the way. Some equity volatility is starting to creep up, while index levels remain close to ATHS.
Markets are still flying high on the central banks and government support pushing valuation higher and higher. However, as inflationary pressure keeps rising and geopolitical tensions between China and the US continue to linger un-resolved, there may soon be an end to the party.
Tensions between the US and China intensify after accusations of misled policies on China were brought up by Chinese officials during a visit of US Deputy Secretary of State in the country. This adds to a series of problems between the two countries stalling hopes for a normalization under new president Biden.
The leading economies seem to be slowly continuing their recovery while Inflation expectations keep rising both in the US and Eurozone. This induced some pressure in fixed income markets and also equities seem to be taking a breather after their rally this year. Let´s see if the summer brings sunshine or rain.
Despite central banks claiming for an only temporary phenomenon inflation expectations and yields continue to rise. This and further mutants of the coronavirus along with mixed success across countries in their vaccination campaigns did not impress equity markets much which continued to rally.
Equity markets took a breather as bond yields started to crawl upwards across the board. Raw materials (particularly Brent) climbed on hopes for a sustainable recovery and the distant possibility of returning to full economic activity.
Better be the hunter than the prey – Retail online investors collude to form a swarm that successfully squeezed out some of the big shorts in the industry. The rebellion was shut down as neobrokers (Reddit, Robin Hood etc.) restricted trading due to systemic concerns. After some cash outs were made by a few members of the swarm the assets concerned reverted to usual levels.
It did not take long for the new year to shape up as nasty as the last one. The rat race between vaccinations and the coronavirus (and unfortunately also its mutated siblings) has begun while the president of the US incites his supporters to storm the Capitol after all his attempts to challenge the election results failed for a lag of substance. Oh boy!
Markets rallied strongly in the wake of vaccine hopes. Most European countries still have re-instated lockdown measures before the Christmas break to dampen the second wave of the pandemic. Once again this is accompanied by huge fiscal support and dovish central banks.
At Arkus, we provide an extensive report that allows to screen for potential liquidity risks stemming from both the asset and the liability side of the monitored portfolio either in current market conditions or under stressed scenarios and at different time horizons.
The EU is drifting into a debt union, accessing capital markets for the first time in its history to finance a huge stimulus package for (and from) its member states. EU realized volatilities fell sharply into their medium regimes while such a move could not be observed for implied volatilities.
Launch of the ESMA supervisory exercise in relation to the ESRB Recommendation on Liquidity Risk in Investment Funds.
National Competent Authorities to which these Guidelines apply must notify the EU regulator whether they comply or intend to comply with the Guidelines, within two months of the date of publication by ESMA of the Guidelines in all EU official languages.
Equity markets continued their recovery fueled by (even more) Central Bank money and fiscal impulses from governments. As for most companies’ earnings outlooks remain grim the P/E gap is widening, and the rally still seems to be merely based on expectations of a catch-up.
ESMA has published updated reporting instructions to be used for reporting under the Money Market Fund Regulation (MMFR).
The European Systemic Risk Board (ESRB) addresses liquidity risk concerns regarding investment funds that have significant exposures to corporate debt and real estate assets.expectations of a catch-up.
EU’s securities market regulator, has published today a supervisory briefing on the supervision by NCAs on the costs applicable to UCITS and AIF’s.
If the ever-increasing sovereign debt levels and also potentially a rise in corporate/retail defaults persists, it might induce further systemic risk and the pressure on the banks might darken the picture again. Even though most asset classes are still in their high regimes, markets seem to anticipate a short-lasting economic impact.
Regulators across Europe are asking asset managers for reams of new information about their ability to meet investor redemptions as they seek to stave off a liquidity crunch sparked by the coronavirus market sell-off.
EU’s securities market regulator launches a common supervisory action with national competent authorities on the supervision of UCITS’ manager’s liquidity risk management across the European Union (EU).
Following the decisive election victory for the conservatives, we try to take an informed look into what 2020 might entail for the asset management sector in the UK and across Europe.
Luxembourg regulator publishes Circular CSSF 19/733 for liquidity risk management for open-ended undertakings for collective investment (UCIs).
Recently, Mark Carney, Governor of the Bank of England, said that “investment funds have a structural mismatch between the frequency with which they offer redemption’s and the time it would take them to liquidate their assets, magnifying market adjustments and triggering further redemptions”. Click here.
Markets started the year lighter as the outbreak of the Corona-virus and the impact on global production chains added to the list of concerns about the global economy. Equity volatility (and vovos) were picking up. Brexit finally happened on paper, but the agreed transitory period is still ongoing, so the blur continues.
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