IMF warns of the vulnerability of open-ended investment funds

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Woodford effect: The IMF has warned of the vulnerability of open-ended investment funds


IMF warns of the vulnerability of open-ended investment funds after collapse of Woodford empire

Woodford effect: The IMF has warned of the vulnerability of open-ended investment funds

The IMF has warned of the vulnerability of open-ended investment funds such as Woodford Equity Income in the wake of the collapse of his savings empire.

The funds typically have to sell assets to raise money when savers want to withdraw their cash. 

Closed funds such as Patient Capital have a fixed number of shares which can be bought and sold. 

Many open-ended funds lack sufficient cash to withstand a rush of withdrawals.

In its global financial stability report, the IMF demands reforms.

It backs a ‘better match of redemption periods with the liquidity profile to mitigate the potential for fire sales’.

Bank of England Governor Mark Carney has also said reform is needed.

 



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