“In the 75-year history of U.S. mutual funds, through numerous interest-rate and market cycles, one thing is clear: investors in stock and bond funds have never ’run’ from those funds,” ICI chief economist Brian Reid said in a statement. “Today’s bond fund investors are stable and focused on long-term financial goals, such as retirement, and there is no evidence to support the notion that they will redeem en masse when interest rates change.”
The SEC has already proposed a rule to boost data the agency collects from asset managers. Future rules could include curbing fund use of leverage and derivatives and implementing stress tests similar to those in the financial industry.
Additional provisions could include guidelines or caps on the amount of illiquid assets that funds can hold. The SEC and some market observers have voiced concerns that funds with illiquid assets could find it difficult to meet redemption requests in periods of high volatility.
Furthermore, funds may be required to anticipate meeting shareholding redemptions within three days, compared to seven days currently required. Funds may also be allowed to charge fees to investors to discourage quick trading activity in periods of market stress.
For more information on the ETF space, visit our current affairs category.
Max Chen contributed to this article.