AICIF amendment changes liquidity management
AIFMD II strengthens the rules for liquidity management of open-ended funds. Fund managers will be required to pre select appropriate liquidity management tools, ensure their timely activation where necessary, and document and justify their use. The amendment to the Act on Investment Companies and Investment Funds (AICIF) comes into force on 16 April 2026.
Harmonised list of liquidity management tools
The change will affect not only managers of qualifying investor funds and special funds but also standard funds. For each open-ended fund, the fund manager will have to select and specify in detail at least two liquidity management tools from the harmonised list. The directive specifically targets tools, the most commonly used of which are likely to be swing pricing, anti-dilution levies, redemption gates, and the extension of notice periods.
In addition, the directive also provides for measures for exceptional situations, in particular the temporary suspension of subscriptions, repurchases and redemptions, as well as the use of side pockets. In relation to these measures, the directive emphasises the need to inform the supervisory authority in good time.
What will change in the fund manager’s obligations
This will not simply be a matter of selecting a couple of tools. Fund managers will have to establish detailed policies and procedures for activating and deactivating the selected tools, including operational and administrative steps. These choices and procedures must be communicated to the supervisory authority. In practice, this means amending the fund’s articles of association, operating rules, and internal regulations and processes so that the tools can actually be applied in practice.
The guidelines issued by ESMA outline what supervisors will typically expect: alignment with the fund’s strategy, the liquidity profile of assets, redemption terms, the results of liquidity stress tests, the investor structure, and the distribution model. ESMA also recommends that fund managers select a combination of tools to cover both normal and stress scenarios (e.g. one quantitative tool and one anti-dilution tool).
How to prepare for the amendment
We recommend conducting a liquidity impact analysis, selecting and setting up appropriate liquidity management tools in line with the investment strategy and investor base, incorporating these into the fund’s articles of association and internal policies, setting up IT and governance processes, and explaining the choice of specific tools to the supervisory authority.
In the next issue of the Tax and Legal Update, we will focus on funds providing loans.