Macquarie has written to investors with the news that as of 28th November, redemptions in their Equinox Series Fund of Funds have been suspended until further notice. Redemptions for 31 October will be processed, but all others, including those for November 28th, are included in the suspension.
Macquarie's letter to Equinox shareholders cited difficult (but now well known) issues affecting underlying managers, who themselves have been limiting or freezing redemptions. This poses a major issue for the Fund of Funds model with liquidity dependent on underlying assets which are themselves illiquid.
As a result there is, and will continue to be, a "cascade" effect as investors seek liquid assets, which in themselves are becoming an increasingly rare commodity.
Macquarie also noted other reasons for the problem, including falling interest rates damaging the mechanism for capital protection, and a falling Australian dollar affecting the value of predominantly US$ underlying investments, as well as impacting the A$/US$ currency hedges employed. Finally, the portfolio employed leverage between 10% and 20% of NAV, and this loan facility had been withdrawn and in current conditions was unable to be replaced.
