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Alternative Market Briefing

COVID-19 update: liquidity management considerations for hedge funds

Tuesday, April 07, 2020

Bailey McCann, Opalesque New York:

by Kevin P. Scanlan and Darina Delappe

Liquidity management has been a hot topic for hedge fund managers (managers) since the great financial crisis of 2008. Liquidity management will likely receive renewed focus from investors and regulators given the recent arrival of a novel coronavirus disease, COVID-19, that is now sweeping the globe and having a massive impact on world markets. Widely believed to have originated in the city of Wuhan in the Chinese province of Hubei in late 2019, the virus quickly spread to other countries, causing widespread disruption of the financial markets and international trade and commerce. On March 11, the World Health Organization declared the outbreak a global pandemic and urged all countries to do more to control the spread of the respiratory disease. Many countries introduced emergency measures that significantly restricted the activities of their residents and visitors, including social distancing and self-quarantining. Simultaneously, Saudi Arabia and Russia triggered an oil crisis by significantly increasing oil production, thereby placing significant pressure on companies operating in the oil industry that rely on higher-priced oil to service their debts. This has resulted in significant turmoil in the global markets, evidenced by severe volatility, dysfunction in the credit markets and significant declines in stock prices.

All of the foregoing has highlighted for fund managers the need to ......................

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