On September 4^th, 2023, ALFI responded to the FSB Consultation addressing Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds.

This consultation, addressing structural vulnerabilities from liquidity mismatch in open-ended funds, was responded in parallel to the IOSCO consultation report in respect of Anti-dilution Liquidity Management Tools, with aim at providing Guidance for Effective Implementation of the Recommendations for Liquidity Risk Management for Collective Investment Scheme. The combined proposed regulatory framework from IOSCO and FSB pursues significant strengthening of liquidity management by OEF managers.

ALFI generally welcomes a principle-based guidance which promotes convergence as well as good practices while allowing for the needed flexibility to address the diversity of the industry. Yet, ALFI’s response highlights the primary responsibility of the fund manager in designing the funds liquidity arrangements, selecting the appropriate liquidity management tools, and implementing those tools for use on a per-case best-fit basis. In particular, ALFI raises concerns against prescriptive rule-based approaches such as the systematic use of bucketing and the mandatory inclusion of significant market impact in the anti-dilution technique.

Read the full ALFI response.