Key Takeaways
- • Only 39% of buy-side risk managers surveyed at Risk Hedge Europe's annual conference reported having formalized liquidity metrics, signaling a critical gap in risk measurement infrastructure across the buy-side.
- • 85% of delegates acknowledged they need better liquidity risk metrics, indicating widespread recognition of shortcomings in current measurement approaches despite limited adoption of formal frameworks.
- • The poll, conducted among risk management professionals at the conference, reveals a disconnect between the importance buy-side firms place on liquidity risk and their ability to quantify and monitor it systematically.
- • Damian Handzy, global head of risk at StatPro, an investor analytics firm, was cited as a source on the topic, suggesting industry expertise exists to address the measurement gap.
Summary
Buy-side risk managers attending Risk Hedge Europe's annual conference disclosed a significant weakness in their operational risk infrastructure: the vast majority lack formalized measures for assessing liquidity risk. An online poll of conference delegates, predominantly from risk management desks, found that only 39% had established formal liquidity metrics within their organizations.
The survey findings underscore a critical blind spot in institutional portfolio management. While 85% of respondents acknowledged the need for improved liquidity risk metrics, the low adoption rate of formalized measurement frameworks suggests many firms are managing liquidity risk through informal or ad-hoc processes rather than systematic quantitative approaches. This gap between acknowledged need and actual implementation represents a material operational risk for asset managers navigating increasingly complex market conditions.
The disconnect is particularly notable given heightened focus on market liquidity stress since the 2015-2016 volatility events. For buy-side investors managing large, diversified portfolios, the inability to formally measure liquidity risk exposure creates potential vulnerabilities during market dislocations when the correlation between assets typically assumed to be liquid can break down rapidly. Damian Handzy of StatPro, a firm specializing in investor analytics, was referenced in the reporting, indicating that industry participants recognize both the problem and potential solutions.
The findings suggest that many buy-side risk managers view liquidity as a secondary concern relative to market, credit, and operational risks, despite its material impact on portfolio construction and redemption management. As regulatory scrutiny of fund liquidity continues to intensify globally, the lack of formal measurement frameworks could become a compliance and competitive liability for asset managers who have not yet implemented standardized liquidity risk monitoring systems.
The survey findings underscore a critical blind spot in institutional portfolio management. While 85% of respondents acknowledged the need for improved liquidity risk metrics, the low adoption rate of formalized measurement frameworks suggests many firms are managing liquidity risk through informal or ad-hoc processes rather than systematic quantitative approaches. This gap between acknowledged need and actual implementation represents a material operational risk for asset managers navigating increasingly complex market conditions.
The disconnect is particularly notable given heightened focus on market liquidity stress since the 2015-2016 volatility events. For buy-side investors managing large, diversified portfolios, the inability to formally measure liquidity risk exposure creates potential vulnerabilities during market dislocations when the correlation between assets typically assumed to be liquid can break down rapidly. Damian Handzy of StatPro, a firm specializing in investor analytics, was referenced in the reporting, indicating that industry participants recognize both the problem and potential solutions.
The findings suggest that many buy-side risk managers view liquidity as a secondary concern relative to market, credit, and operational risks, despite its material impact on portfolio construction and redemption management. As regulatory scrutiny of fund liquidity continues to intensify globally, the lack of formal measurement frameworks could become a compliance and competitive liability for asset managers who have not yet implemented standardized liquidity risk monitoring systems.
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