Background

Changes to the AIFMD and UCITS Directive which introduce a harmonised framework for the use of liquidity management tools (“LMTs”) must be implemented into EU member state law by 16 April 2026.

The European Securities and Markets Authority (“ESMA”) recently consulted on a framework for the use of LMTs by AIFMs managing open-ended alternative investment funds (“AIFs”) and by management companies of UCITS (each a “manager”). On 15 April 2025, ESMA published final guidelines on the selection and calibration of LMTs (the “Guidelines”) and updated draft regulatory technical standards (“RTS”) to determine the characteristics of the LMTs. We have summarised below some of the key differences between the initial draft Guidelines and RTS published as part of the consultation and the proposed final versions of those documents.

What happens next?

The European Commission has until 15 July 2025 to decide whether to endorse the RTS, with the ability to extend this review period by an additional month. The Guidelines will start applying on the date of entry into force of the RTS. Funds existing before the entry into force of the RTS will have twelve months to comply with the Guidelines.

What should AIFMs and UCITS management companies be doing now?

While the RTS are not yet final and remain subject to potential modification by the European Commission, managers should proactively review their current LMT arrangements against the framework proposed by ESMA to assess any changes that may be necessary to fund documents, policies and procedures and governance arrangements.

RTS

Regulatory Topic	Initial Draft RTS	Proposed Final RTS
Redemption gate thresholds	% of NAV only	AIFs: % of the NAV, a monetary value (or a combination of both), or % of liquid assets UCITS: % of NAV only
Calculation of redemption orders	Only net redemption orders allowed when calculating activation thresholds	Managers may use either net or gross redemption orders
Treatment of small redemptions	No special treatment; all redemptions subject to gate once threshold exceeded	Managers may now exempt small redemption orders (below a defined amount) from the gate, to protect smaller investors
Application across share classes	Required uniform application of LMTs across all share classes	This requirement has been removed, acknowledging that ESMA lacks the mandate to regulate LMTs at the share class level
ETF market impact	Pro-rata redemption rule applied uniformly, including to ETFs	Clarifies that pro-rata redemption requirement does not apply to ETF authorised participants or market makers on the primary market

Guidelines

Regulatory Topic	Initial Draft Guidelines	Final Guidelines
Selection of LMTs	Recommended selection of one quantitative LMT and one anti-dilution tool	Retained as a recommendation, but clarified that selection remains at the full discretion of the manager
Governance requirements	Prescribed internal policies, LMT plans, and governance arrangements	Removed, on the basis that such matters are already covered under the organisational requirements of the AIFMD and UCITS Directive
Investor disclosure	Included additional disclosure obligations on activation, deactivation, and calibration of LMTs	Removed, as disclosure requirements are already addressed under the AIFMD (Article 23(1)(h)). UCITS were not referenced in this context
Depositary responsibilities	Imposed a duty on depositaries to verify the proper application of LMTs by managers	Removed, as ESMA lacks a legal mandate to impose these duties and existing rules are sufficient
Prescriptive calibration guidelines	Included restrictive obligations on the selection, activation and calibration of LMTs	Removed to preserve manager discretion and avoid overlap with RTS requirements

For more information and advice these or other changes to the AIFMD or the UCITS Directive, please contact any member of our Asset Management and Investment Funds Group.