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Alternative Market Briefing

Bill Gross says hedge funds, mutual funds and ETFs are vulnerable to liquidity scarcity

Wednesday, July 01, 2015

Komfie Manalo, Opalesque Asia:

There are concerns in the financial markets that center around the absence of liquidity and the effect it might have on future market prices, writes Bill Gross, partner at Janus Capital, in his latest monthly newsletter. Janus Capital Group Inc. is a global investment firm managing approximately $189.7bn in assets (March 2015).

After 2008, central banks imposed emergency liquidity provisions and became buyers of last resort. Recent Congressional legislation about "too big to fail" and Federal court rulings in favor of AIG on the expropriation of shareholders’ capital have created doubts as to whether central banks and governments can impose "puts" to stabilize future asset prices. So, he continues, regulators are creating "better safe than sorry" mandates, by restraining bank capital standards and the size of the repo market, and looking into "strategically important" financial institutions. Major banks, insurance companies and managers including PIMCO are being scrutinized. Several institutions have responded.

"’No problem" sums it up – markets are a little less liquid they claim, but recent experience would show that for PIMCO at least, there were no "fire sales" or "forced selling" after my recent departure, as stated by CEO Doug Hodge in a friendly WSJ article," he says. But the PIMCO example is not a goo......................

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