UCITS Liquidity Risk Management ESMAs 11 Areas for Improvement

UCITS Liquidity Risk Management: ESMA’s 11 Areas for Improvement

ESMA has published the results of the 2020 Common Supervisory Action (CSA) on UCITS liquidity risk management (LRM). UCITS are characterised by the offer to investors of on-demand liquidity. Article 84(1) states that UCITS shall repurchase or redeem its units at the request of any unit-holder. If the assets held within the fund cannot be sold quickly to meet redemption requests, there could be severe issues in paying redeeming investors. This can be exacerbated in times of stress when investors may look to redeem en masse whilst the market for the assets is drying up.

Asset Managers Need to Step Up Their Liquidity Efforts – ESMAs Five Key Priorities

Asset Managers Need to Step Up Their Liquidity Efforts – ESMA’s Five Key Priorities

Throughout the year regulators have focused on liquidity, and as this year draws to a close, that focus shows no signs of diminishing. “Asset managers need to step up their efforts to ensure the liquidity of their funds is adequately managed and that they are prepared for future shocks” – that was the closing remarks from Steven Maijoor’s Keynote Address at EFAMA’s Investment Management Forum which heavily focused on liquidity risk.

September Liquidity Deadlines: Reminder on Funds Investing in Inherently Illiquid Assets

September Liquidity Deadlines: Reminder on Funds Investing in Inherently Illiquid Assets

The 30 September compliance deadline is fast approaching for a number of liquidity developments. Including: ESMA’s new guidelines on liquidity stress testing in UCITS and AIFs. The FCA’s new rules for certain open-ended funds investing in inherently illiquid assets. FCA and Bank of England survey to review the liquidity mismatch in open ended funds Article 37 MMF Reporting for both Q1 and Q2.

Liquidity Mismatch

The Liquidity Mismatch

This month marked one year since the collapse of Neil Woodford’s LF Woodford Equity Income fund. The Woodford fund was suspended in June, after it became overwhelmed by redemption requests from investors. One year on and investors are still awaiting their final pay-out. One year on and questions concerning the liquidity mismatches in open-ended funds still remain.