Liquidity management
The tools a fund manager uses to meet redemption requests in stressed markets: cash buffers, redemption gates, in-specie transfers, and dilution adjustments.
Liquidity management is the discipline of ensuring a fund can meet redemption requests without forced selling that damages remaining unit holders. The toolkit, as disclosed across NZ retail PIE PDSs, includes: a minimum cash buffer; permitted use of credit lines; the ability to suspend or defer redemptions in stressed markets ("redemption gates"); in-specie transfer of securities in lieu of cash for large redemptions; and dilution adjustments (swing pricing, buy/sell spreads).
Open-ended PIE funds promise daily liquidity in normal conditions but the PDS and SIPO reserve broader powers for stress events. A balanced or growth diversified fund typically holds 1–3% cash for normal flows; specialist alternative funds may require notice periods of 30–90 days or longer for large redemptions.
Liquidity-management mechanics are disclosed at three levels: a plain-English summary in the PDS, the binding policy in the SIPO, and the granular operational detail in the OMI. The Quarterly Fund Update reports the actual cash percentage at quarter-end.
Related terms
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swing-pricing
Swing pricing
A unit-pricing mechanism where the fund's unit price is adjusted up on net inflow days and down on net outflow days to pass transaction costs onto entering/exiting investors rather than the existing pool.
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transaction spread
Buy/sell spread
A fixed percentage applied at the point of order to cover the transaction costs of investing inflows or liquidating to meet outflows. Charged once, not annually.
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PDS
Product Disclosure Statement (PDS)
The headline legal document a NZ managed fund or KiwiSaver scheme provides to retail investors, summarising the fund, fees, risks, and how to invest.
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SIPO
Statement of Investment Policy and Objectives (SIPO)
The fund-manager document setting out the fund's investment objectives, strategy, asset-allocation ranges, derivative use, hedging, rebalancing and exclusion rules — filed on FMA Disclose and binding on the manager.
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OMI
Other Material Information (OMI)
A supplementary FMA-required disclosure document containing material information about a fund or scheme — typically conflicts of interest, related-party transactions, fee waivers, auditor/trustee/custodian identities — that is not included in the PDS.