This report presents stress-test simulations utilizing fund holdings information from LSEG Lipper. Its mannequin traces how an preliminary decline in asset costs prompts investor withdrawals, leads funds to promote property, and generates additional losses as these gross sales depress costs.
The examine compares outcomes with out LMTs with outcomes underneath a 2% redemption charge and a gate that caps redemptions at 5% of fund web asset worth throughout a redemption window. It additionally examines completely 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, further losses from pressured promoting, and money paid to redeeming traders. Situations draw on asset-price volatility in late 2024 and through the 2022 United Kingdom liability-driven funding disaster, alongside extra excessive hypothetical shocks.
