The global credit crisis triggered liquidity squeezes in areas such as securities lending and short-term investment funds, which are generally immune to such problems, according to a Greenwich Associates survey.
At the height of the credit crunch, a number of U.S institutions experienced either an unexpected interruption in liquidity or unanticipated risks and credit exposures in securities lending pools and short-term investment funds, the survey found, adding that a relatively small number of institutions were forced to realize losses.
The survey of executives from 141 corporate and public pension funds, endowments and foundations, also showed a number of institutions had lax oversight of investment practices before the crisis erupted in 2007.
As a result, institutions are reviewing their policies governing securities lending pools and short-term investment funds, including evaluating the costs and benefits of securities lending programs; increasing oversight of investment practices; and restricting investment in complex securitized products.
The survey found that among the respondents over the past year, 47% experienced unanticipated risk or credit exposure in their securities lending; more than 20% found an unanticipated lack of liquidity in their securities lending collateral pools; nearly 33% found unexpected risk or credit exposure in short-term investment funds; and more than 45% say they are currently reviewing internal policies related to their securities lending programs or short-term investment programs.