The hidden dangers of liquidity risk in pension funds investors need to know about
Good Money Guide has released a guide for investors worried about liquidity risk in pension funds.
The suspension of the Woodford Equity Income fund in June, and the M&G Property Portfolio fund in December, brought back painful memories of people queuing to take their money out of Northern Rock at the start of the credit crunch in 2007.
What, then, do investors need to know about liquidity risk? The Good Money Guide runs through some commonly asked questions on the subject and also explains how investors can avoid being caught up in a run on a fund, or at least reduce the risk of it happening.
The guide covers:
What exactly is liquidity, and liquidity risk in the stock market?
What actually happens when a fund gets into difficulty?
Why couldn’t investors get their money back even though the fund still held considerable assets.
How concerned about liquidity should investors generally be?
What can investors do to avoid finding themselves in this situation?
Should people be concerned about funds they are already invested in?
But should investors avoid illiquid assets altogether?
So, if you do want exposure to very small companies or commercial property, for example, what would be a sensible approach?
Richard Berry founder of the Good Money Guide said: "There is nothing worse than being stuck in investments you can't get out of. Liquidity risk is a hidden danger of investing in almost all asset classes. Even FTSE 100 stocks can be subjected to it."
Robin Powell, author of the guide said: "Liquidity has always been a risk for investors and probably always will be. Investors who want the peace of mind that comes with knowing they can always get hold of their money should take it seriously."
The free report can be found online here: https://goodmoneyguide.com/what-investors-need-to-know-about-fund-liquidity-risk/
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