Fund Alerts: a bespoke tool to monitor liability management and liquidity risk of funds in real time

Following the crises of recent years, the French Regulatory Authority (AMF) has decided, at the beginning of this year, to reinforce its requirements with regards to liquidity risk management tools¹. These tools make it possible to limit the risks incurred during massive redemptions of UCITS² by holders, when the liquidity of the assets of the UCITS does not allow for a disinvestment equivalent to the redemptions under good conditions.

The AMF encourages UCITS to implement liquidity risk management mechanisms (Gates, swing pricing, side pocket and suspension of redemptions, etc.) and Societe Generale Securities Services (SGSS) assists them with the implementation of these mechanisms.

With this in mind, SGSS decided to launch Fund Alerts, a tailored prevention tool that tracks investor subscriptions and redemptions and fund liquidity risk in real time, well in advance of the fund's closing, or at closing.

Fund Alerts is a bespoke digital solution that enables fund managers to react and activate a commercial or regulatory action plan very quickly:

• By receiving real-time information on subscription/redemption orders in order to limit liquidity risks and stay informed on an ongoing basis before any transaction is closed;

• By receiving real-time information on the fund's inflows and outflows on the closing date;

• By receiving alerts according to criteria that the fund manager has defined according to his/her priorities and the characteristics of the portfolio;

• By choosing the appropriate method of communication for receiving notifications: SMS push notifications, e-mails or updates on the SG Markets portal, the single and secure client platform of Societe Generale group.

According to criteria chosen by the fund manager (with a threshold in terms of percentage and/or amount), Fund Alerts offers four different alerts to fund managers:

• An alert when subscriptions & redemptions for the current NAV are closed: 

Based on a percentage or amount threshold defined by the fund manager in SG Markets. This allows the manager to:

- monitor the inflows and outflows and to implement commercial or risk prevention actions

- implement regulatory measures, for example to activate Gates

• A closure alert linked to the materiality threshold: 

An alert is sent to the manager when a significant, material threshold given in the fund or SICAV³ prospectus is reached.

• Two real-time alerts for subscription and redemption orders received:

According to a percentage or amount threshold defined by the manager in SG Markets, these last alerts are used to monitor client redemption and subscription order flows and to implement a commercial action plan if necessary. The manager has an overview of the alerts created on the SG Markets interface as well as a management dashboard.

Fund Alerts is currently deployed and available in France. It is also available in Luxembourg for funds distributed internationally⁴.

Martial Vuillot, Chief Operating Officer of S2G / Amundi Group, uses and appreciates Fund Alerts:

We have subscribed to SGSS' Fund Alerts service for several months now to monitor our multi-asset manager liability management, and in times of crisis when increased monitoring of movements is essential, we are very satisfied with the product, which meets our expectations and provides real added value to better control our liquidity risks.

To better understand the usefulness of Fund Alerts, let's walk through a scenario:

• Imagine that we have an asset manager in France, during a period of volatile financial markets;

• Some investors who are not satisfied with performance decide to exit the fund;

• The uninformed manager, caught off-guard by this significant cash outflow, is left to deal with the consequences, having been unable to prevent the client from exiting the fund.

This example illustrates frequent cases where, via its solution, Fund Alerts would have sent a notification to the manager, informing him/her immediately of the cash outflow and enabling him/her to implement a corrective action.

By receiving this information immediately and by accessing the details of the transaction directly in the dedicated client space on SG Markets, the manager can contact an investor in order to dissuade him or her from exiting the fund, for example by proposing commercial  terms or different alternatives.

Today, information has become crucial and receiving it at the right time makes all the difference: With Fund Alerts, the manager can react quickly and avoid having to implement restrictive liquidity risk management measures such as Gates, or receive a notification as soon as possible when he/she must implement any of these mechanisms.

More information on Fund Alerts here.

Discover our video on the Gates mecanism.

Article written by Morgane Seveno (Product Manager Fund Distribution France & Trustee)

¹In French only
²UCITS: Undertakings for Collective Investment in Transferable Securities
³SICAV: Société d'Investissement à Capital Variable or open-ended investment company
⁴Luxembourg, Irish and German funds