TITLE: European Securities and Markets Authority Issues Guidelines on Liquidity Management Tools for UCITS and Alternative Investment Funds
BODY:
On 12 March 2026, the European Securities and Markets Authority (ESMA) published guidelines on liquidity management tools (LMTs) for Undertakings for Collective Investment in Transferable Securities (UCITS) and open alternative investment funds (AIFs). The guidelines establish consistent supervisory practices for the selection, calibration, activation and deactivation of LMTs used to manage liquidity risk and mitigate financial stability risks.
The guidelines apply to competent authorities and fund managers under Article 18a(2) of the UCITS Directive (2009/65/EC) and Articles 16(2b) and 16(2c) of the Alternative Investment Fund Managers Directive (2011/61/EU), as amended by Directive (EU) 2024/927. They take effect on the date the related regulatory technical standards come into force, with a 12-month transition period for existing funds.
The guidelines establish general principles requiring fund managers to select appropriate LMTs considering fund structure, investment strategy, business terms, liquidity profile, stress testing results, investor base characteristics and operational constraints. Fund managers must select at least two LMTs from specified categories: quantitative tools (redemption restrictions, notice period extensions, in-kind redemptions, suspensions); and anti-dilution tools (redemption fees, swing pricing, dual pricing, anti-dilution levies). The guidelines provide detailed calibration requirements for each tool, emphasising that managers must demonstrate activation and calibration serve investors' best interests and are appropriate for prevailing market conditions.
Competent authorities must notify ESMA within two months of publication whether they comply with the guidelines, providing reasons for any non-compliance. Market participants are not required to report compliance.
REFERENCES:
ESMA (2026). Guidelines on Liquidity Management Tools for UCITS and open AIFs. ESMA34-671404336-1364. Available at: www.esma.europa.eu