IOSCO has published its report on how collective investment schemes (CIS) manage their liquidity risk. It found that:

  • most jurisdictions clearly distinguish open-ended schemes from closed-ended ones, and some tools are specific to certain types of scheme;
  • the most common tools are: redemptions fees; redemptions gates; redemptions in kind; side pockets; and suspension of redemptions;
  • funds are generally required to have appropriate risk management and internal quality controls to ensure that all material risks are properly identified, assessed, monitored and controlled;
  • open-ended funds are generally subject to additional regulatory requirements dealing with fund leverage, asset concentration, investor concentration, restrictions on illiquid asset investment and short-term borrowings; and
  • historically, many of the liquidity management tools outlined in the report have been activated within individual jurisdictions.

(Source: IOSCO Publishes CIS Liquidity Management Report)