Fed concerned about ability of asset managers to repay in a crisis

Washington

SECTIONS of the US financial system that may be vulnerable to investor panic are raising concerns inside the Federal Reserve, as policymakers preparing for the first interest rate hike in nearly a decade seek to ensure that the market is ready and able to handle it whenever it happens.

The Fed is particularly worried about whether the booming asset management industry can withstand a run of redemptions in a financial crisis.

Chief among the Fed's concerns, increasingly voiced in public remarks, is that certain funds held by individuals and institutions will not have the underlying assets sufficient to back investors cashing out in a panic. The lack of liquidit…