Flashnews: Liquidity Management Tools – Rise in power of gates in France

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This joint study on the liquidity management tools (LMT) of French funds, describes the regulatory framework applicable to the various LMTs and explains how they work. These tools, introduced in the French regulatory framework, are a response to the financial stability issues that have been identified regarding liquidity in investment funds worldwide. The update of the study makes it possible to note the rise in power of gates mainly for the moment by alternative funds and real estate funds. This tool, which temporarily limits the exercise of redemptions, can in theory be associated with Swing Pricing or Anti-Dilution Levies (ADL), which aim not to penalize the holders remaining in the funds during liquidity crises.

That said, although there has been an increase in the deployment of LMTs in some fund categories since the end of 2017, there is still a significant margin of progression for liquidity management tools to become a market standard for French investment funds.

Source: AMF document