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LieF: The Liquidity Evaluation Framework

June 03, 2017

To better factor liquidity risk into their investment strategies, Wellington Management developed a proprietary tool to evaluate liquidity in fixed income portfolios.



Since the global financial crisis in 2008, bouts of fixed income market illiquidity have provided important reminders of the need to factor liquidity risk into investment strategies. To support this objective, Wellington Management developed the Liquidity Evaluation Framework (LiEF®), a proprietary tool designed to help clients evaluate fundamental questions about the liquidity of their fixed income portfolios:

  • How liquid is my portfolio?
  • How long could it take for me to liquidate or fund my entire portfolio?
  • Which assets may be difficult to sell?
  • How has the liquidity of my portfolio changed over time?

 

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All investments are subject to risks, including the possible loss of principal. Fixed-income investments are subject to interest-rate risk (the risk that the value of an investment decreases when interest rates rise), credit risk (the risk that the issuing company of a security is unable to pay interest and principal when due), liquidity risk (the risk that an investment may be difficult to sell at an advantageous time or price), and call risk (the risk that an investment may be redeemed early).

All information and representations herein are as of 06/15, unless otherwise noted.

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