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Background
On 17 November 2025, the European Commission published delegated regulations adopting the final regulatory technical standards ("RTS") on liquidity management tools ("LMTs"), supplementing AIFMD and the UCITS Directive.
This follows the publication of the draft RTS by the European Securities and Markets Authority ("ESMA") in April 2025. See our previous Insights post on this here.
Key Changes
The final RTS do not materially diverge from the draft RTS published by ESMA. The key differences are set out below:
Redemption Gates
The RTS has expanded on the threshold for redemption gates for AIFs by stating that a fund's activation threshold can be:
- at fund level based on total net or gross redemption orders for a given dealing date or over a specified period expressed as: (a) a proportion to the NAV of the AIF; (b) as a monetary value; (c) as a percentage of liquid assets; or (d) as a combination of points (a), (b) or (c);
- at investor level based on the individual gross redemption orders submitted by each investor for a given dealing date or over a specified period expressed as: (a) a percentage of an investor's holdings in the AIF; or (b) a proportion to the NAV of the AIF; or
- a combination of both fund level and investor-level gates.
This is not the case for UCITS funds, which can only apply an activation threshold based on total redemption orders or proportion of the fund's NAV.
Redemption Fees
For redemption fees, the draft RTS had provided that the predetermined range of redemption fees should include explicit and implicit transaction costs. The final RTS now states that explicit transaction costs shall be taken into account but implicit transaction costs borne indirectly by the fund on transactions in assets (i.e. primarily arising from the bid-ask spread and market impact) need only be included where appropriate to the investment strategy of the fund and shall be estimated on a best efforts basis.
A similar change has been made in relation to sections on calculating swing pricing, dual pricing, and anti-dilution levies.
Redemptions in Kind
The provisions on redemptions in kind acknowledge that the transfer of assets to investors may be indirect via intermediaries.
Side Pockets
The section on side pockets now provides that: (i) the side pocket share class shall be closed to subscriptions, repurchases and redemptions; and (ii) both the side pocket and the fund must be managed in accordance with the fund's existing investment strategy.
Next Steps and Transitional Provisions
The RTS are now subject to a 3-month scrutiny period by the European Council and European Parliament before they are published in the Official Journal of the European Union in Q1 2026.
On 16 April 2026, the published RTS will apply to all funds constituted on or after 16 April 2026.
There will be a 12 month-transitional period for existing funds; the published RTS will apply from 16 April 2027 to funds constituted before 16 April 2026. If any AIFM or UCITS voluntarily chooses to subject such funds to the requirements from 16 April 2026, they must notify their competent authority.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
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