European Commission adopts RTS for fund liquidity management tools

At a glance

On 17 November 2025, the European Commission adopted two texts related to liquidity management tools (LMTs): level 2 Regulatory Technical Standards (RTS) as required from “Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC” issued on 26 March 2024.

More specifically, these level 2 Regulatory Technical Standards (RTS) address liquidity management tools under both the Alternative Investment Fund Manager Directive  (AIFMD) and the Undertakings for Collective Investment in Transferrable Securities (UCITS) Directive. These standards aim to enhance the effectiveness of liquidity management in investment funds, ensuring consistent application across the European Union. The regulatory framework provides options for fund managers to use a combination of liquidity management tools and anti-dilution mechanisms to address specific challenges. 

A closer look

Within these Regulatory Technical Standards (RTS), the European Commission has outlined policies to assess the suitability of LMTs based on the fund's legal structure, investment strategy, redemption policy, liquidity profile, investor base, and distribution policy. These LMTs include suspension of subscription, redemptions, or repurchases, redemption gates, notice period extensions, redemption fees, swing pricing, dual pricing, side pockets, anti-dilution levies, and redemptions in kind.

Each mechanism will be subject to specific criteria and application conditions:

• Suspension of subscriptions, repurchases, and redemptions: The mechanism should apply to all investors and share classes simultaneously, ensuring temporary cessation of all transactions to manage liquidity during stress.
• Redemption gates: Partial restrictions at fund or investor level (only for AIF) should limit the volume or proportion of shares that can be redeemed within a given period, leading to a control on fund outflows.
• Extension of notice periods: Additional time can be added to the standard notice periods for redemption requests, allowing fund managers to better plan liquidity needs without altering redemption frequency.
• Redemption fees: Charges can be applied to redemption of shares, reflecting both explicit and implicit costs, including market impact. These charges can be set as a percentage or a monetary amount and are useful to discourage excessive withdrawals.
• Swing pricing: Adjustment of the net asset value performed to reflect transaction costs associated with buying or selling shares of the fund including any significant market impact, mitigating the potentially adverse impact of frequent or large transactions on a fund’s valuation and long-term performance.
• Dual pricing: Offering a bid and ask net asset value reflecting the transaction costs linked to inflows and outflows
• Side pockets: Creation of a separate share class or fund isolates assets with other economic or legal features due to exceptional circumstances, preventing subscriptions and redemptions from affecting the main fund.
• Anti-dilution levies: Fees may be charged directly to investors entering or exiting the fund to safeguard existing investors from transaction costs associated with other investors' capital activities, including any significant market impact.
• Redemptions in kind: This allows investors to leave with the assets corresponding to their redemption without triggering transactions on the market. This avoids dilution of performance as there would not be any transaction costs.

These tools are designed to enhance the liquidity management capabilities of fund managers, supporting stability and investor protection during market fluctuations. 

Potential impact for the fund industry

The new RTS will impose more stringent liquidity management practices. Fund managers will need to strategically select at least two tools from the regulatory standards, thus introducing a greater level of oversight on how liquidity risk is managed.

Many fund managers already have such mechanisms in place. For those that do not, implementing these new standards could increase both administrative efforts and potential costs as fund managers adapt their systems and processes. However, this reality may be offset by longer-term gains in investor confidence and increased resilience of the funds in varying market conditions.

Compliance with these new technical standards may also require updates to fund documentation and operational policies, emphasizing transparency and effective communication with investors regarding their liquidity management policies in place. We foresee the following impacts:

Next steps

The RTS will enter into force 20 days after their publication in the Official Journal of the European Union. The regulation will apply from 16 April 2026.

For UCITS and AIFs established before that date, the European Commission has introduced a one-year transitional period, giving them until 16 April 2027 to achieve compliance with the RTS.

The European Commission emphasizes that the requirement to select at least two LMTs is mandated by Directive (EU) 2024/927, which is applicable from 16 April 2026.

How Deloitte can help

With more than 10 years of experience in liquidity management tools (LMTs), Deloitte has developed a deep knowledge and understanding of the techniques used in Europe and around the world.

We can provide assistance in:

1. Designing new LMT for your funds, including:

• Benchmarking market practices to define the most suitable solution based on each setup.
• Defining applicable governance, roles, and responsibilities.
• Executing quantitative analysis of the funds in scope to define the computation methodology.
• Performing project management assistance with regard to implementation.

2. Reviewing your current LMT model, including:

• Benchmarking market practices to identify potential competitive gaps.
• Defining rules to assess the significance of market impact.
• Operating a gap analysis of the governance currently in place to identify risks of non-compliance.
• Analyzing the current calculation methodology to improve the accuracy of the parameters computed.
• Back-testing the values historically used to assess the dilution avoided.

3. Providing ongoing assistance to help your clients operate LMT programs, including:

• Periodically computing the dilution adjustment.
• Periodically computing the dilution threshold.
• Conducting periodic back-testing reviews to assess the effectiveness of the LMT used.