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February 01, 2018

IOSCO issued a report on recommendations and good practices to improve liquidity risk management of open-ended collective investment schemes. To supplement its recommendations, IOSCO also issued a report that provides practical information, examples, and good practices on open-ended fund liquidity risk management.

Recommendations for Liquidity Risk Management for Collective Investment Schemes. This report sets out recommendations to entities responsible for managing the liquidity of collective investment schemes to ensure that liquidity is managed to safeguard and protect the interests of investors, even during stressed market conditions. The report also includes additional guidance by IOSCO to securities regulators to promote good liquidity management practices for collective investment schemes. This final report replaces the liquidity risk management framework contained in the 2013 IOSCO report titled "Principles of Liquidity Risk Management for Collective Investment Schemes." This constitutes the final step in the response of IOSCO to address the FSB-identified potential structural vulnerabilities in the asset management sector. The final report builds on responses received from the July 2017 consultation of IOSCO on liquidity risk management recommendations for collective investment schemes. IOSCO expects securities regulators to ensure effective implementation of the recommendations and promote their application by responsible entities. IOSCO intends to assess implementation of these recommendations across relevant jurisdictions in the next two to three years.

Open-Ended Fund Liquidity and Risk Management: Good Practices and Issues for Consideration. This report is intended to assist regulators, the industry, and investors. For regulators, it can act as a reference guide that illustrates how various jurisdictions regulate liquidity risk practices within their remit. For the industry, the examples describe where, when, and how certain tools have been used in the past and how they can be used in the future. Additionally, the report describes good practices for liquidity risk management throughout the life cycle of a fund. For investors, this document outlines scenarios in which an asset manager may use liquidity management tools to manage liquidity issues in certain funds.

 

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Keywords: International, Securities, Liquidity Risk, Systemic Risk, Collective Investment Schemes, IOSCO

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