Amundi Bond Chief Says Bank Debt Not Answer in Crisis

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Amundi’s Eric Brard, who oversees about 500 billion euros ($565 billion) in fixed-income assets, said increasing short-term borrowing to fund redemptions in a bond market selloff was “not the solution.”

Brard, head of fixed income for the Paris-based asset manager, said he’s not looking to increase lines of credit. He instead prefers “more sensible” solutions to managing outflows including using swing pricing, where a manager spreads the transaction costs of meeting a single redemption request, such as commissions to brokers and taxes, across the entire fund to minimize the impact on the per-share value of the fund.

“Access to leverage is not the solution that we target to manage liquidity,” Brard said in a telephone interview from Paris. “It changes the structure of the portfolio. Swing pricing is a more sensible solution than using an overdraft.”

Concerns about liquidity have been triggered by a surge in volatility, in part due to uncertainty over Greece’s future in the euro area and the prospect of rising U.S. interest rates. Global bond markets have lost about $640 billion since the end of April.

Martin Gilbert, chief executive officer of Aberdeen Asset Management Plc, said this week that his firm had arranged about $500 million in short-term credit lines to meet redemptions in the event that a selloff in the bond market dries up liquidity.

BlackRock Inc. and Goldman Sachs Group Inc. have also set aside additional money. New York-based BlackRock, the world’s largest money manager, has more than quadrupled the amount its mutual funds can collectively borrow to meet withdrawals to $2.1 billion since the start of 2013.

Brard said Amundi regularly tests the liquidity of its portfolios to see how they would fair in various scenarios. He also said maintaining a good relationship with counterparties was important along with using “regulatory facilities” such as swing pricing.

Brard said that while he was more cautious on liquidity, the firm hadn’t seen any recent outflows. Instead, some investors added to their holdings after the market selloff.

Amundi, majority-owned by Credit Agricole SA, oversees 954 billion euros in assets, 55 percent of that in fixed income.

(Corrects figure in first paragraph of story first published June 18.)
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