TITLE: European Securities and Markets Authority Issues Guidance on Liquidity Management Measures for UCITS and Open-Ended Alternative Investment Funds
BODY:
On March 12, 2026, the European Securities and Markets Authority (ESMA) published guidance on the selection and calibration of liquidity management measures (LMMs) for undertakings for collective investment in transferable securities (UCITS) and open-ended alternative investment funds (AIFs).
The guidance implements requirements under the UCITS Directive (2009/65/EC) Article 18a(2) and the Alternative Investment Fund Managers Directive (2011/61/ES) Articles 16(2b) and 16(2c), as amended by Directive (EU) 2024/927. Fund managers bear primary responsibility for liquidity risk management and must select appropriate LMMs from prescribed lists, including quantitative measures (redemption gates, notice period extensions, in-kind redemptions) and anti-dilution measures (redemption fees, variable pricing, dual pricing, anti-dilution levies).
The guidance establishes principles for LMM selection, requiring fund managers to evaluate suitability based on fund structure, investment strategy, asset liquidity profiles, redemption policies, stress-testing results, and investor characteristics. Managers must select at least two appropriate LMMs, though additional measures are permitted. The guidance addresses specific calibration approaches for each measure type, emphasizing that LMM activation should occur only under appropriate market conditions and that managers must regularly review and adjust calibrations. Suspension of subscriptions and redemptions is restricted to exceptional circumstances. The guidance also addresses segregated portfolios, which should be established only in extraordinary circumstances affecting specific portfolio components.
Competent authorities must report compliance within two months of publication. The guidance applies from the effective date of the technical regulatory standards under the amended directives, with a twelve-month transition period for existing funds.