The segment of the monetary dynamic French was emblematic of this drift

Liquidity, a former concern, was delivered to the taste of the day with the crisis of the "subprime". On this occasion, management companies have been unable to transfer some of their assets in good conditions to collect money and allowing their customers out of their funds. They have been victims of a fall in liquidity that have known markets with bankruptcy in 1998 of the "hedge fund" LTCM. Liquidity, "it is the price of the immediacy, the price to pay to convert currency assets in a short period of time, and without penalty, defines Myron Scholes, former Nobel Prize in economics and was one of the founders of LTCM." And this award is not constant. It increases when investors become more pessimistic on the economy or crises.

The communication of the "asset managers" seized this concept much convenient to explain in large part the fall of the performance of their managers, including those who had invested in products related to the sub-prime. A way for them to escape liability in part of their responsibility in the reference on the market and the sudden drying of the transactions he has known.

Race performance

With the return and the risk, this concept appears, as a significant dimension, long neglected, any investment policy, investors tend to be inherently liquid markets, probably too, which may turn against them in the end (see below). In a context of improving continuous liquidity on stock exchanges (see illustration below), the "asset managers" were also used to have "banks market-makers on very many instruments and virtually all asset classes, said Aymeric Poizot, senior director in the"funds and asset management"Department at FitchRatings.". When, with the crisis, they have faced themselves refinancing problems and a deterioration of their balance sheet, banks no more provided this function of liquidity provider, taking on its head managers and leading to serious problems of valuation and liquidity of assets.

In the race for the performance, some "asset managers" went too far by offering daily of their fund value even though they were invested assets potentially little liquid, resulting in the passage of the problems of valuation (see sidebar below). The segment of the monetary dynamic French was emblematic of this drift. But, in 2002, regular cash funds had acquired the obligations of enterprises (France Telecom, Vivendi...) to boost their performance. When the "spreads" (difference of remuneration of government bonds) of these groups have jumped, managers found themselves with illiquid securities and in sharp decline. An unfortunate incursion reminiscent a few years later on the sub-prime us risk...

Fitness active/passive

However "the first concern of a Manager is to ensure liquidity to its customers, in accordance with its commitments as set by the prospectus in the case of open funds," said Eric Boutchnei, Director General of Metropole management, which is expensive for the Manager (read page 33), this obligation to the "Foundation of our business." Somewhat disturbingly, some "asset managers" appear to be realized with the crisis, they had much risk of liability, i.e. clients...

"The management as a whole will have to focus much more specifically to the asset/liability adequacy in the funds, a match that came so far for granted, without really draw attention to the risks that may have some differences such as those from the lifetime of the securities on the assets, said Guillaume Poli"Chairman of the Executive Board of Edmond de Rothschild Financial Services. UCITS asset/liability adequacy issues fit into the broader context of the consequences of the new accounting standards on the management of institutional investors, said Xavier Lépine, President and CEO of UFG Alteram. Encourage these standards them to be very liquid assets on the basis, which is unrealistic, that they must be able to meet all their commitments at any time. Asked for an insurer to manage its assets as if it had to be able to resell them in an instant!

An inconsistency in the case of UCITS. Demand a total and immediate of their passive liquidity will have profound effects on their investment policy and mechanically reduce their investment horizon. "If many academic works exist on the concept of optimum portfolio, it is time that the research is developing optimum liabilities and the ideal relationship which must exist between the assets and liabilities of a Fund," said Xavier Lépine.