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Portfolio liquidation


Hassan Ennadifi
Senior Director, Product Manager, SimCorp

Joseph Au-Yeung
Principal, Product Specialist, SimCorp

How long will it take to liquidate a portfolio – and what will it cost you?

For a long time, liquidity monitoring for a portfolio focused on the asset liquidity profile and was calculated by aggregating position level liquidity metrics such as 'days-to-trade’ or the liquidity score. The main question being asked was: How long would it take to liquidate x% of a given portfolio? The question of liquidation cost was very often omitted (or assumed to be minimal) and the liquidation horizon was the priority.

However, over the last 10 years, this has gradually changed. Thanks to ever-evolving regulation from the likes of ESMA and the SEC, investment managers and risk managers now need to consider the liquidity profile of their portfolios in increasingly sophisticated ways. The question that is now being asked is: How long would it take to face a redemption representing x% of the portfolio and what would be the cost involved?

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