The AFG has responded to ESMA’s consultation on the regulation of Open-Ended Loan Funds (OE LO AIFs). The AFG supports ESMA’s proposed approach to liquidity management, which avoids any parametric criteria, and insists on the need to offer flexibility to asset managers in the design of their funds, while ensuring sufficient protection for investors.

In its response, the AFG mentions it is important :

• not to create a regulation that would add to other existing regulations (AIFM – ELTIF), which would unnecessarily complicate the work of asset managers,
• to emphasise the importance of cash flows generated by loans, which play a key role in managing fund liquidity and limit the need to sell assets,
• to take into account the experience of asset managers in structuring loans to optimise liquidity, accompanied if necessary by the activation of ex-post management tools,
• not to impose minimum liquidity thresholds through regulation. In their recent reports on liquidity management, it must be noted that the FSB and the IOSCO have recommended not to impose minimum liquidity thresholds,
• to reinforce the proportionality of the obligations set out in the text,
• and not to add specific additional stress test requirements, stressing that ESMA’s current rules on open-ended funds appear sufficient.

In conclusion, the AFG advocates a pragmatic and proportionate approach that is sufficiently flexible to give asset managers the latitude they need to structure their funds and thus support the economy.