Are you prepared for liquidity risk?

It's easy to see how a sell-off in bonds might get out of hand, says Cris Sholto Heaton. Investors should take note.

Earlier this year, the Financial Times reported that the Federal Reserve was considering imposing exit fees on US-based corporate bond funds to reduce the risk of a potential run on these funds. On the face of it, this may not sound like a good idea: after all, there are few things more likely to start a panic than telling people you're going to make it harder to withdraw their money.

But misguided or not, it's a clear sign that regulators are concerned about the mismatch between how easy it is for investors to pull money out of funds and howdifficult it might be for the funds tomeet those redemptions.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.