Funds could be forced to suspend if they see a spate of redemptions in a short period, forcing them to sell assets, which would be difficult, given market conditions.
Around a year ago, a number of property funds were forced to suspend as a result of liquidity, while earlier this month New Star suspended its Heart of Africa fund for this reason.
Bond fund managers have been in a bullish mood, saying yields in corporate bond funds could be in double figures over the next couple of years.
Intethic director Jonathan Purle says: “Where we are suspecting bond funds may experience difficulties is in terms of high-yield bonds. They can be less liquid and are more likely to invest in the sort of companies that will default if they cannot refinance their debt in 2009.”
Hargreaves Lansdown investment manager Ben Yearsley says: “There is a possibility that some bond funds may have liquidity issues. At the moment, bonds are relatively illiquid, so if a lot of money comes out in a short space of time, feasibly a fund manager could suspend a fund to protect remaining investors.”