Davis Polk partner Chris Healey was quoted in Ignites discussing what compliance teams should keep in mind when preparing for any potential market volatility.

“Covid tested a lot of policies, procedures and practices in a way that hopefully people are better positioned now, but there have been a lot of new entrants to the ‘40 Act space,” said Chris. “There are probably people out there [for whom] this could be a shock to the system, given how rapidly things have developed.”

He continued, noting that “as the market declines, fund managers should be thoughtful now about liquidity cushions so that they aren’t forced to sell assets at a low price and then lose out when such assets eventually gain in a recovery.”

“How a fund responds to market changes depends on whether its assets have direct exposure to pending and forthcoming international tariffs, one of the causes of the current bout of volatility, or whether the fund just has general exposure to the market,” he added.

Chris pointed out that “the last market downturn sparked a rise in activist investors purchasing shares in closed-end funds.”

“When markets change quickly, compliance teams might want to engage with the investment team multiple times a day, rather than just once a day,” he said.

“‘Don’t Skimp on Compliance’: Prepping for Market Volatility,” Ignites (March 14, 2025) (subscription required)

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