ESMA Liquidity Stress Testing Consultation
Summary
SIFMA AMG sent comments to the European Securities and Markets Authority’s consultation on its draft guidelines on Liquidity stress testing in Alternative Investment Funds and Undertakings for the Collective Investment in Transferable Securities.
We welcome that ESMA decided to adopt a principles-based approach and to ensure consistency in the supervisory practices across the EU through high-level LST requirements for investment funds.
We also welcome that the draft guidelines reflect certain aspects of the IOSCO Recommendations for Liquidity Risk Management for Collective Investment Schemes. In particular, we appreciate the incorporation of Recommendation 14, which stipulates that stress testing arrangements should be tailored to the size, investment strategy, underlying assets and investor profile of the investment fund.
Excerpt
European Securities and Markets Authority (ESMA)
CS 60747
103 rue de Grenelle
75345 Paris Cedex 07 France
Re: Response to Consultation Paper Draft
guidelines on liquidity stress testing in UCITS and AIFs
The Asset Management Group (the “AMG”) of the Securities Industry and Financial Markets Association (“SIFMA”) appreciates the opportunity to provide comments to the European Securities and Markets Authority’s (“ESMA”) consultation on its draft guidelines on Liquidity stress testing in Alternative Investment Funds (“AIFs”) and Undertakings for the Collective Investment in Transferable Securities (“UCITS”)1 (hereinafter “draft guidelines”).
The AMG is the voice of the buy side within the securities industry and broader financial markets, which serves millions of individual and institutional investors as they save for retirement, education, emergencies, and other investment needs and goals. The AMG’s members represent U.S. asset management firms whose combined assets under management exceed $45 trillion.
The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. While our members operate both inside and outside the United States and many are considered to be global enterprises, the background and orientation of our organization is rooted in U.S. laws and regulations.
The ESMA draft guidelines were issued in response to the recommendations by the European Systemic Risk Board (“ESRB”) on liquidity and leverage risks in investment funds2 intended to encourage a consistent approach in the use of liquidity management tools across the EU.