Thu, Sep 5, 2019
On September 2 2019, the European Securities and Markets Authority (ESMA) published final guidelines regarding liquidity stress testing of Alternative Investment Funds and UCITS funds. Although the guidelines are applicable to both managers and depositaries of such funds, the majority of the guidelines are applicable to the relevant fund manager.
The ESMA guidelines follow recommendations by the European Systemic Risk Board published in 2018 on liquidity and leverage risk in investment funds.
The guidelines clarify that liquidity stress testing should:
The guidelines also clarify:
Fund managers should be able to demonstrate to their regulators that authorized funds’ strategy and dealing frequency enable them to remain sufficiently liquid during normal and stressed circumstances.
The guidelines, which apply from September 30 2020, should be adapted to the nature scale and complexity of the fund. A link to the guidelines is available here.
End-to-end governance, advisory and monitorship solutions to detect, mitigate, drive efficiencies and remediate operational, legal, compliance and regulatory risk.