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Investment Analytics

ESMA Liquidity Risk Solution

Following several high-profile market events, the European Securities Market Authority (ESMA) is strengthening liquidity stress test guidelines for alternative investment funds (AIF) and Undertakings for the Collective Investment in Transferable Securities (UCITS).

Taking effect on 30 September 2020, ESMA’s guidelines will require managers to:

  • Have a strong understanding of liquidity risks from assets and liabilities
  • Ensure liquidity stress testing is suitably integrated into their fund’s risk management framework
  • Document liquidity stress testing in a policy within the UCITS and AIF risk management process
  • Design and independently validate robust liquidity and liquidity stress testing models
  • Perform annual liquidity stress testing; however, ESMA recommends stress testing quarterly or even more frequently

We’re here to help

Our advisory services and comprehensive ESMA liquidity risk solution can help you to prepare for stress-testing guidelines, understand the impact of hypothetical market events on your funds, and assess and manage risk.

With functionality to stress test both the assets and liabilities within your portfolio, and the ability to perform fund-level reserve stress testing, our ESMA liquidity risk solution helps you avoid the expense of implementing an in-house program. You will also have access to our proprietary web-based risk engine to meet your analytical and reporting needs. And to help ensure we are interpreting the regulation accurately, our models are regularly validated by one of the Big Four consulting firms.