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
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.
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.
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.
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.
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.