17 November 2020

ESMA report relating to ESRB Recommendation on Liquidity Risk in Investment Funds published

As a response to the ESRB recommendation issued on 6 May 2020 (see our earlier communication: https://www.cssf.lu/en/2020/06/esrb-covid-19-related-policy-actions-implications-for-investment-funds/), ESMA and the national competent authorities undertook a focused piece of supervisory engagement with investment funds having significant exposure to corporate debt and real estate assets.

The objective of this exercise was to assess the preparedness of these investment fund types to potential future elevated redemption pressures, a deterioration in market liquidity conditions and/or increased valuation uncertainty, as well as to evaluate whether enhancements are necessary.

The CSSF launched this exercise in July (see: https://www.cssf.lu/en/2020/07/launch-of-the-esma-supervisory-exercise-in-relation-to-the-esrb-recommendation-on-liquidity-risk-in-investment-funds/) and asked a larger sample of UCITS- and alternative investment fund managers to complete a dedicated questionnaire.

The CSSF would like to hereby thank participating asset managers for their support in this exercise and at the same time inform market participants that, having concluded the data collection and analysis together with national competent authorities, ESMA has now published the related findings, including 5 priority areas for action which would enhance the preparedness of these fund categories. For the detailed results and conclusions, please refer to: