Liquidity Management Tools for funds
What are the new guidelines for Liquidity Management Tools?
The European Securities and Markets Authority (ESMA) is requiring the implementation of Liquidity Management Tools for funds to facilitate liquidity management during redemption shocks and stressed market conditions.
The purpose and guideline of the Liquidity Management Tools requirement is to reduce potential financial stability risks and promote harmonization of liquidity risk management within the investment fund sector.
The Guidelines will start applying on the date of entry into force of the Regulatory Technical Standard (RTS). Funds existing before the entry into force the RTS will have twelve months to comply with the Guidelines.
How ISEC can help you
Contact us for a review of the changes that have been made to the final Guidelines and the draft RTS.
Our risk experts can perform liquidity analysis and stress tests of your funds and advise on appropriate liquidity tools and conditions for activation and calibration.
SECURA Platform already includes functionality for swing pricing, and additional liquidity management tools will be developed
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Learn about the Guidelines and Regulatory Technical Standards (RTS)
On April 15 2025, the European Securities and Markets Authority (ESMA) published the final reports on the Guidelines (GL) on Liquidity Management Tools (LMTs) and the Draft Regulatory Technical Standards (RTS).
The publications are a key step in the implementation of the revised AIFMD and UCITS Directive.
Read final reports from ESMA
Quantitative-based LMTs
Extension of notice periods
The fund manager may decide to extend the regular notice period for shareholders requesting redemption.
Anti-Dilution Tools (ADT)
Redemption fees
A redemption fee is a charge imposed on investors when they sell shares of a fund.
Swing pricing
Adjusts the fund’s NAV depending on inflows and outflows to protect existing investors from the costs incurred due to the subscription and redemption of fund shares by other investors.
Dual pricing
Calculation of two NAVs (ASK, BID). Adjustable spread on the fund’s NAV based on MID.
Anti-dilution levy
A fee added to subscriptions or redemptions of a fund to cover the costs associated with buying or selling the fund’s assets.
Other Tools
Redemption in kind
Investors receive assets instead of cash upon redemption.
Side pockets
The fund manager moves illiquid asset into a side pocket, which is a separate sub-account within the fund.
Contact us with your inquiry.
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