This is the warning from Reserve Bank of Australia deputy governor Philip Lowe, who told a regulatory summit on Wednesday that while banks were now better prepared for a global funding crisis, the rapid growth of assets in managed funds meant risks had expanded in this area.

He said in Australia, assets in a managed funds had ballooned from 40 per cent of gross domestic product in the early-1990s to 125 per cent today. Globally, asset managers are estimated to have around $US76 trillion ($98.3 trilion) under management, equivalent to around 55 per cent of global banking assets.

While this growth in itself - ascribed to an ageing population, increased wealth and regulatory changes to how banks set up investment vehicles - was not problematic, the scarcity of relatively safe but high-yielding investments could ultimately trap managers faced with a sudden onslaught of redemptions.

"Money has flowed into collective investment vehicles that invest in a range of higher-yielding assets, including those in emerging markets," Mr Lowe said.

"Many of these vehicles allow investors to redeem their funds at short notice, even though the underlying assets are not particularly liquid, and are likely to be even less liquid at a time when there are large-scale redemptions.

"This has occurred at a time when liquidity has declined in some markets, partly in response to a lower appetite for risk and tighter financial regulation," he said.

"This combination of developments raises the question of what might happen in stressed conditions."

Mr Lowe's warning echo those of an array of central bank officials and investment experts over the last year, whose main fear is that the US Federal Reserve's first rate hike in about a decade - expected some time this year - will trigger capital flight away from high-yielding high-risk investments back to US dollar assets.

Buyer scarcity as sellers mass could drive down the sale price of these assets, forcing huge writedowns of their value to investors and managers.

Fed vice-chairman Stanley Fischer told a conference in Israel early on Wednesday Australian time that the US central bank is braced for global market upheaval as it moves to "normalise" rates after years of having them near 0 per cent.

"In  the normalising of its policy, just as when loosening policy, the Federal Reserve will take account of how its actions affect the global economy," Mr Fischer said.

"The actual raising of policy rates could trigger further bouts of volatility, but my best estimate is that the normalisation of our policy should prove manageable for the emerging market economies."

Mr Lowe said Australian experience had shown that the key to preparing investors for sudden market shocks was communication of risk, clear rules around redemptions, "appropriate separation of bank-managed investment funds and bank owners", regular updating of unit prices, and the prevention of contagion and systemic breakdown.

"Globally, there is considerable effort being devoted to understanding the nature of the risks in this area, including whether these risks are any different to those that would arise if investment portfolios were managed directly by the individual investors themselves, without the input of an asset manager," Mr Lowe said.

"A related stream of work – which in some way parallels similar work for the banking industry – is to examine what role regulation should play in addressing the various risks and what role the central bank should play."