ESMA Proposes Enhanced Liquidity Management Standards for Loan-Originating AIFs Under AIFMD II

The European Securities and Markets Authority (ESMA) has issued draft regulatory technical standards (RTS) under the updated Alternative Investment Fund Managers Directive (AIFMD II) to govern open-ended loan-originating alternative investment funds (AIFs). These proposals aim to ensure robust liquidity management by requiring fund managers to align liquidity risk management systems with the funds’ investment strategies and redemption policies.

Key measures include defining suitable redemption policies, maintaining adequate liquid assets to meet investor demands, and conducting quarterly liquidity stress tests. Managers must also implement systems to monitor liquidity risks continuously, considering factors such as portfolio diversification, credit quality, and investor behaviors. The RTS emphasize the importance of carefully calibrated liquidity management tools and stress scenarios to address market pressures.

These proposals reflect ESMA’s commitment to enhancing market stability and investor protection by promoting transparency and resilience in the operations of loan-originating AIFs.

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