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By Opalesque:

Following a push by the European Commission to amend the AIFMD and UCITS Directive, one of the amendment concerning the standardisation of the liquidity management tools (LMTs) available to fund managers and investors during times of market stress, the European Securities and Markets Authority (ESMA) has published comprehensive Regulatory Technical Standards (RTS) and Guidelines establishing a detailed framework for LMTs under AIFMD II.

This framework requires fund managers of open-ended Alternative Investment Funds (AIFs) and UCITS to select and implement at least two LMTs from a prescribed list, aiming to harmonize industry practices across the EU and enhance market stability during periods of stress.

Key liquidity management tools

According to global law firm Eversheds Sutherland, the framework outlines several specific LMTs that managers must understand and potentially implement:

Suspension of operations: This is an "all or nothing" tool requiring simultaneous suspension of subscriptions, repurchases, and redemptions across all share classes. It should only be used in exceptional circumstances such as asset valuation difficulties, severe liquidity issues, cyber incidents, market closures, financial crises, or natural disasters. Notably, t......................

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