FR - Liquidity management - inventory of existing tools
On 9 November 2021, Banque de France and the AMF published an update to their July 2020 study on the liquidity management tools (LMT) of French funds, which 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 shows that gates have increased, mainly driven for the time being by alternative funds and real estate funds. This tool, which is used to temporarily limit the exercise of unit redemptions, may in theory be associated with Swing Pricing or ADL, which aim to avoid penalising unitholders remaining in the funds during liquidity crises. That said, even though an increase in the roll-out of LMTs has been seen in certain fund categories since the end of 2017, there is still significant room for improvement in order for liquidity management tools to become a market standard for French investment funds.
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