meta_id 2961358

On March 12, 2026, the European Securities and Markets Authority (ESMA) published guidelines on the selection and calibration of liquidity management tools (LMTs) for undertakings for collective investment in transferable securities (UCITS) and open-ended alternative investment funds (AIFs). The guidelines implement mandates set out in Directive (EU) 2024/927, which amended the UCITS Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). The guidelines establish consistent supervisory practices for fund managers and competent authorities regarding LMT selection, activation and calibration. Fund managers retain primary responsibility for liquidity risk management and must select at least two appropriate LMTs from prescribed lists. ESMA recommends fund managers consider selecting at least one quantitative-based LMT (redemption gates or extension of notice periods) and at least one anti-dilution tool (redemption fees, swing pricing, dual pricing or anti-dilution levy). The guidelines cover suspension of subscriptions and redemptions, redemption gates, extension of notice periods, redemptions in kind, anti-dilution tools, and side pockets. Fund managers must assess LMT suitability considering fund structure, investment strategy, dealing terms, liquidity profile, stress testing results, investor characteristics and operational feasibility. Guidelines specify that suspensions and side pockets should be activated only in exceptional circumstances, while anti-dilution tools should be calibrated to reflect estimated liquidity costs fairly under both normal and stressed market conditions. Competent authorities must notify ESMA of compliance or non-compliance within two months of publication, with reasons for any non-compliance. The guidelines apply from the date of application of related regulatory technical standards, with a twelve-month transition period for existing funds.