Writing in the December 2015 Financial Stability Report, the FPC said after completing its review of the potential risks posed to UK financial stability by the activities of open-ended investment funds, it supported “the Bank’s intention to incorporate the activity of investment funds into system-wide stress testing and, in the near term, to assess the resilience of markets to large-scale fund redemptions.”
Pointing out that open-ended investment funds currently account for $26 trn (11%) of assets under management globally the FPC said: “The recent rapid growth in open-ended funds, and their continued investment in less liquid assets, has reinforced the risk that large-scale investor redemptions could result in sales of assets by funds that might test markets’ ability to absorb them.”
As a result of this concern and in response to its March 2015 statement the committee said the BoE and the FCA conducted a joint information-gathering exercise on 17 asset management firms and 143 of their funds, focusing on those with large holdings of corporate bonds.
