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Global regulators are concerned about the ability of funds to
function during periods of stress -- including being able to pay
back investors -- and had asked leading industry participants to
respond to proposed rule changes.
In June, the FSB, set up after the financial crisis to ensure
the stability of the financial system, proposed 14 measures to
be implemented from the end of 2017, including monitoring
leverage and stress-testing.
In a Sept. 21 letter to the FSB posted on its website, BlackRock
said "we believe there is merit in developing principles for the
stress testing of individual open-end funds", but rejected any
form of system-wide stress test.
The asset manager said it was important to remember that the
liquidity stress testing of funds was different to that of
banks, with managers needing to avoid a fire sale of assets to
meet redemptions.
"Liquidity risk stress testing is one tool that can be helpful
to ensure fund managers are maintaining appropriate liquidity,"
it said in the letter.
The issue of liquidity was highlighted earlier this year by the
failure of a junk bond fund run by U.S. asset manager Third
Avenue, whose illiquid assets could not be sold quick enough to
meet redemption requests, leading it to shut down.
(Reporting by Simon Jessop, editing by Louise Heavens)
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