This report presents stress-test simulations utilizing fund holdings knowledge from LSEG Lipper. Its mannequin traces how an preliminary decline in asset costs prompts investor withdrawals, leads funds to promote belongings, and generates additional losses as these gross sales depress costs.
The research compares outcomes with out LMTs with outcomes beneath a 2% redemption charge and a gate that caps redemptions at 5% of fund web asset worth throughout a redemption window. It additionally examines totally different charge and gate settings when managers use each instruments collectively. These settings are modeling assumptions, not advisable ranges for each fund.
The simulations assess complete fund losses, extra losses from pressured promoting, and money paid to redeeming buyers. Eventualities draw on asset-price volatility in late 2024 and in the course of the 2022 United Kingdom liability-driven funding disaster, alongside extra excessive hypothetical shocks.
