SHANGHAI (Stocksak), China’s regulators have asked money market fund managers to improve their investor structure and ensure adequate liquid assets. This is in an effort to reduce liquidity risks in the sector worth $1.4 trillion.
According to sources, securities regulators have asked fund managers to avoid an excessive number of institutional investors in money markets funds.
Fund managers who manage funds with more assets than 70% must ensure that at least 20% is invested in liquid assets. Bond durations must be kept under 70 days.
According to one source, the goal of the guidance was to avoid extreme market volatility in the event that massive redemptions occur.
Another source claimed that regulators are concerned about the possibility of liquidity stress if interest rates rise above a low point now.
The China Securities Regulatory Commission(CSRC) did not immediately respond to a request to comment.
At the end of September, money market funds accounted for 46% of China’s mutual funds industry. They totalled approximately 10.7 trillion yuan ($1.46 billion).