June 26, 2025 - Following on two consultation reports published last November, the International Association of Securities Commissions (IOSCO) recently published its Final Report on revisions to its 2018 Recommendations for Liquidity Risk Management (LRM) for Collective Investment Schemes (CIS) (“Revised Recommendations”). The Revised Recommendations operationalize the Financial Stability Board’s (FSB) December 2023 Revised Policy Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-End Funds and incorporate other changes to reflect market and policy developments since the publication of the 2018 Recommendations. Alongside the Final Report, IOSCO has published an implementation guide for open-end funds (OEFs).  

Notably, there is significant overlap of the Revised Recommendations and the existing regulatory requirements for U.S. open-end loan funds. This not only should give retail and institutional investors comfort that U.S. loan funds’ LRM practices align with global standards but also make development of similar products in non-U.S. markets by U.S. managers more efficient.

The Final Report includes 17 recommendations under six sections: the CIS Design Process, Liquidity Management Tools and Measures, Day to Day Liquidity Management Practices, Stress Testing, Governance, and Disclosures to Investors and Authorities. Two of the recommendations are new, three contain substantive changes, and the remainder have received editorial changes. The key revisions in the report comprise:

1. Incorporating the categorization approach, which entails ensuring that OEFs’ investment strategy and the liquidity of its assets should be consistent with the terms and conditions governing fund unit redemptions both at the time of designing an OEF and on an ongoing basis;
   
   
2. Considering and implementing a broad set of anti-dilution liquidity-management tools (LMTs) (e.g., swing pricing), quantity-based LMTs (e.g., gates) and other liquidity management measures to the extent allowed by local law and regulation for each OEF under their management, in both normal and stressed market conditions as part of robust liquidity management practices;
   
   
3. Considering and using anti-dilution LMTs to mitigate material investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs. Such tools should impose on subscribing and redeeming investors the explicit and implicit costs of subscriptions and redemptions, including any significant market impact of asset sales to meet those redemptions.

To better assess the delta between IOSCO’s recommendations and LRM regulations for U.S. open-end loan funds, we provide the comparison chart below.

LRM Topic	IOSCO 2025 Final Recommendations	US Open-End Loan Funds
Scope and Objective	Applies broadly to open-ended CIS, with 17 recommendations across design, tools, stress testing, governance, disclosures	Focused on U.S. open-end funds under the Investment Company Act of 1940, specifically Rule 22e‑4
Design and Redemption Alignment	Funds must match redemption terms to asset liquidity – including illiquid assets, with potential for low-frequency/redemption notice	No design requirement; can offer daily redemption even with illiquid bank loan holdings
Liquidity Buffers	Firms must holistically assess asset liquidity (quantitative and qualitative); calibrate buffers and thresholds	Funds must maintain highly liquid investment minimums (HLIM) based on risk profile; SEC guidance highlights stricter HLIM for loan funds
Liquidity Management Tools (LMTs)	Encourages use of anti-dilution tools, soft/hard gates, swing pricing, redemption deferrals, side pockets – no one-size-fits-all	SEC has not mandated swing pricing or gates; existing LMTs optional; no hard close; reporting via N‑PORT & N‑CEN
Stress Testing Requirements	Must conduct stress tests for redemptions, margin calls, etc., under normal and stressed conditions, influencing thresholds and buffers	Rule 22e‑4 requires periodic stress testing, but specifics left to fund discretion; focus on “reasonably anticipated trade size” rather than stylized stresses
Governance and Oversight	Robust board oversight, with periodic review of liquidity frameworks, thresholds, and tools	Boards oversee liquidity programs; SEC requires service-provider disclosures on N‑CEN; less prescriptive oversight
Transparency and Disclosures	Enhanced requirement for public and regulator disclosures, including contingency and trigger thresholds	Required monthly N‑PORT filings (30 days post‑month end); illiquid exposures above 15% flagged; no mandate for liquidity gates disclosure
Regulatory Evolution and Timing	Final report on 26 May 2025; full implementation encouraged by jurisdictions, review by end‑2026	Rule 22e‑4 effective since 2018; SEC recently adopted monthly N‑PORT/N‑CEN enhancements (effective Nov 2025 / May 2026 for smaller funds)

It’s worth noting that the report indicates that some of the recommendations may be relevant to closed-end funds, although they apply less strictly than in the case of open-end funds. The potential broader implication for all ’40 Act Funds is worth noting as asset managers seek to expand retail access to private corporate credit through perpetual/evergreen vehicles.