ICMA AMIC and EFAMA issue joint response to IOSCO consultation on fund liquidity management by open-ended funds

 

21 April 2021 ICMA’s AMIC and EFAMA have submitted a joint response to the IOSCO consultation on fund liquidity management by open-ended funds.

The response highlights how industry practices and existing regulatory provisions in Europe are well aligned with the Liquidity Risk Management (LRM) recommendations issued by IOSCO in 2018.

AMIC and EFAMA also acknowledge the positive impact of the LRM recommendations, as they have incentivised national supervisors to encourage and facilitate the use of LMTs, which are now available in most European jurisdictions and in all main fund domicile centres, covering almost all AuM managed by UCITS and AIFs.

The response notes that, in the context of the COVID-19 market downturn in March/April 2020, liquidity risk was well management by investment funds domiciled in Europe and refer to an ESMA report which concluded that (1) out of the 174 AIFs studied, none used substantial leverage nor had to suspend redemption and (2) out of the 459 UCITS fund studied, only 6 UCITS funds suspended temporarily (up to 13 days).

This shows that fund liquidity risk management is overall sound in European funds and that existing EU rules - including those implementing IOSCO LRM - are sufficient. However, AMIC and EFAMA reiterate the need to facilitate the access to information related to shares/units held by the different categories of underlying investors to better appraise liability risks.
ICMA Zurich

T: +41 44 363 4222
Dreikönigstrasse 8
8002 Zurich
ICMA London

T: +44 20 7213 0310
110 Cannon Street
London EC4N 6EU
ICMA Paris

T: +33 1 70 17 64 72
62 rue la Boétie
75008 Paris
ICMA Brussels

T: +32 2 801 13 88
Avenue des Arts 56
1000 Brussels
ICMA Hong Kong

T: +852 2531 6592
Unit 3603, Tower 2
Lippo Centre
89 Queensway, Admiralty
Hong Kong
 
Copyright © 2021 International Capital Market Association.