IHS Markit (Nasdaq: INFO), a provider of critical information, analytics and solutions on financial markets, today announced an alliance with MSCI (NYSE: MSCI) to provide a regulation-ready liquidity risk management solution to asset management companies.
The new multi-asset class solution will be available from next month and will integrate fixed income market and liquidity data from IHS Markit with MSCI LiquidityMetrics analytics. It will help the asset managers to implement liquidity risk management programs and comply with SEC Rule 22e4, which requires asset managers to classify their portfolio according to its liquidity standards. It will cover equities and all fixed income instruments, including government, supranational, agency, corporate sovereign and municipal bonds, securitized products, syndicated loans and credit default swaps.
This new service will classify the liquidity of each asset in a portfolio and will calculate the complex liquidity indicators while factoring in the market scenarios – a process which is generally challenging in fixed income markets where only small amount of securities are traded regularly. And, in accordance with SEC guidelines, asset managers are permitted to hold only 15 percent of a fund’s assets under the illiquid category.
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Kiet Tran, MD and Head of Pricing and Reference Data at IHS Markit, said: “Fund managers face major hurdles in obtaining the data they need to comply with the SEC’s liquidity rule. This challenge is most acute in fixed income where assessing liquidity is not dependent on trade data alone.” He added: “IHS Markit has unparalleled access to fixed income market data and we are pleased to collaborate with MSCI on a robust solution for liquidity management. Sophisticated funds understand that liquidity risk is something they need to manage alongside market risk and credit risk and that the SEC rules codify several aspects of what’s already a best practice for many firms.”
Giulio Panzano, Global Head of Analytics and Product Management at MSCI, said: “High-quality data and reliable analytics are necessary ingredients in establishing an effective liquidity risk management program. In integrating IHS Markit data we are able to offer our clients a scalable solution designed to help them manage liquidity risk and meet regulatory requirements in a cost-efficient manner.”