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Liquidity Risk - Relevance to Actuaries [23]

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Bullet points include: Investors in such funds typically receive payouts that are largely or wholly determined by the assets held in relation to these liabilities. Units can usually be surrendered on demand. Ordinarily liquidity characteristics of underlying assets flow through to end investors. But fund provider may feel for reputational reasons that it cannot turn off liquidity to its clients when liquidity of assets in fund tails off. And leveraged funds may be subject to forced unwind risk, so dynamics not always just driven by end investor perspectives. LESSON: Merely packaging illiquid assets up into a unitised vehicle does not intrinsically reduce liquidity risk, at least not in stressed scenarios

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