Blijf alert op voldoende LMT’s en correcte AIFMD-rapportage

The Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB) are urging Dutch fund managers to ensure they have sufficient liquidity management tools (LMTs) in place, regardless of investor type, and to report their use correctly.
This call comes after an investigation in 2022 revealed that some funds lack adequate LMTs, which can lead to asset fire sales during market stress. Not all alternative investment funds are reporting their LMT usage accurately. The AFM and DNB have reiterated earlier recommendations, including regular reviews of liquidity management practices, and, if necessary, enhancing liquidity management practices by amending the prospectus. Also, notifying changes to the prospectus, and including active LMTs in AIFMD reporting and to correct discrepancies between survey responses and AIFMD reporting.
The results of the survey shows that notice periods are the most commonly activated LMT, and LMTs with pricing characteristics (e.g., anti-dilution fee, swing pricing, and redemption fee) are also commonly used.
The findings from the analysis of liquidity management tools (LMTs) include:
– Some open-end funds lack essential LMTs, and there are discrepancies between survey responses and AIFMD reporting
– About 43% of available LMTs are activated, with some confusion about what constitutes an activated LMT
– Funds should align redemption terms with asset liquidity to avoid potential mismatches and report LMT activations to the AFM
The AFM emphasizes the importance of having appropriate LMTs, aligning redemption terms with asset liquidity, and promptly reporting LMT activations to the AFM.