Following on from the introduction of the mandatory use of at
least two liquidity management tools
(“LMTs”) by all UCITS and open-ended
alternative investment funds (“AIFs”)
in recent reforms to the Alternative Investment Fund Managers
Directive (“AIFMD”) and UCITS
Directive (known as AIFMD 2.0), the European Securities and Markets
Authority (“ESMA”) has published two consultation
papers relating to the use of LMTs. The new requirements relating
to LMTs aim to harmonise liquidity risk management in the
investment funds sector.
The list of LMTs from which the two LMTs may be selected is set
out in the Annexes to the amended directives and includes
redemption gates, extension of notice periods, redemption fees,
swing pricing, dual pricing, anti-dilution levies and redemptions
in kind. The consultations set out proposed regulatory technical standards
(“RTS”) on the characteristics of
LMTs, such as calculation methodologies and activation mechanisms,
and draft guideline
