Fund houses need to reassess their core service providers, industry experts claim, given the “banking-like regulatory environment” gradually being imposed on asset managers.

Global legislators, including the Financial Stability Board, are increasingly concerned about the ability of funds to function during periods of stress, including their ability to pay back investors.

BlackRock, the world's biggest asset manager, recently told the FSB it supports plans to stress test individual mutual funds to make sure they function properly during extreme market environments.

The US asset manager added it was important to remember that the liquidity stress testing of funds was different to that of banks, with managers needing to avoid a fire sale of assets to meet redemptions.

Last month Aberdeen Asset Management, Europe’s third-largest listed fund house, said the UK’s financial watchdog had asked it to increase the level of cash it holds for regulatory purposes from £335m to £475m.

Meanwhile, consolidation across the industry, such as the newly announced merger of Janus Capital and Henderson, is also causing more concern from regulators over the risks investment firms potentially pose to the health of the global financial system. 

“Following the ‘too big to fail’ challenges of global banks, it is not surprising to see regulators turning their attention to large fund managers,” Tim Thornton, chief operating officer, fund services at MUFG Investor Services, wrote in a note to clients this week.

“While there is no solid evidence that they pose a systematic risk or contributed to the banking crisis; the increasing consolidation of the industry into fewer, larger managers does concentrate risk.”

MUFG’s Thornton added that the recent examples of asset management companies being asked to increase capital requirements demonstrate that regulators are concerned about the dangers posed by the liquidity crisis and the impact it could have on large fund managers, and the sector as a whole.

“Seemingly liquid markets may be more illiquid than they appear due to cross holdings and concentrations among fewer, larger buyers and sellers,” Thornton wrote. “Given the current challenging market environment and investor uncertainty, further regulatory action on capital requirements is imminent.

“It is important for fund managers growing in size to have service providers who are large enough to handle their scale and global model, and the imposition of a banking-like regulatory environment. It is also critical for managers to assess their providers to ensure they do not add concentration risk.”