Alex Brazier, executive director for financial stability at the Bank of England, in a Sept. 2 speech highlighted the growing investments in illiquid assets by open-ended funds.
He said such investment vehicles may take too long to sell their holdings and deal with outflows, forcing them to put their bonds offer at fire-sale prices to free up cash. This could create a vicious loop of selling as this initial wave of discounting could drive further redemptions, leading investors to rush for the exit door at the same time. Read: These funds could prove a toxic mix for investors looking to withdraw money at once
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