ESMA are seeking input on draft guidelines and Regulatory Technical Standards (RTS) for liquidity management tools (LMTs) under the revised AIFMD and UCITS Directive. The consultation is open for 3 months until 8 October 2024.
The guidelines and RTS aim to be in line with the latest global standards provided by the FSB and IOSCO. They are designed to promote convergent application of the Directives for both UCITS and open-ended AIFs and make EU fund managers better equipped to manage the liquidity of their funds, in preparation for market stress situations. Additionally, they intend to clarify the functioning of specific LMTs, such as the use of side pockets, a practice that currently varies significantly across the EU.
The draft RTS specify the characteristics of the LMTs. ESMA defines the constituting elements of each LMT, such as calculation methodologies and activation mechanisms.
The draft guidelines provide guidance on how managers should select and calibrate LMTs, in light of their investment strategy, their liquidity profile and the redemption policy of the fund.
AREF's Public Policy Committee will be reviewing the draft RTS and guidelines and considering if AREF should respond to the consultation.
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