The Malta Financial Services Authority has published a report titled “Liquidity Stress Testing for Maltese retail funds”. This report, which was authored by Francesco Meglioli and Stephanie Gauci, gives various insights of how stress and adverse conditions impinge on investment funds and how they are affected from a liquidity perspective.
One of the key findings of the report is that from the micro-level liquidity stress test it emerged that the majority of Maltese retail funds that formed part of the sample hold enough highly liquid assets to withstand three different levels of worst-case redemption requests without incurring material liquidation losses.
From the macro-level liquidity stress test, it emerged that most of the Maltese retail fund strategies hold a cash buffer well above the redemption scenarios generated by stressing the macro-economic environment.
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