CP25/38: Enhancing fund liquidity risk management

Read CP25/38 (PDF)[2]

Our proposals will help make sure AFMs of undertakings for collective investment in transferable securities (UCITS) schemes and non-UCITS retail schemes (NURS) have effective anti-dilution tools to help prevent the value of investors’ investments becoming diluted over time.

These proposals will also make sure AFMs of UCITS schemes and NURS, particularly those with portfolios with a high level of less liquid assets, have robust liquidity risk management processes in place.  

Who this is for

• AFMs for their UCITS schemes and NURS.
• MiFID investment managers, where the AFM has delegated the portfolio management function of a UCITS scheme or NURS to them.  
• Depositaries of authorised funds.
• Investment platforms and other fund distributors.

It may also be of interest to:

• Investors in authorised funds.  
• Financial advisers and investment consultants.
• Alternative investment fund managers (AIFMs) overseeing authorised and unauthorised alternative investment funds (AIFs) (in terms of chapter 6, 'Looking ahead to the 2026 AIFMD review consultation').  

Next steps

Please respond to this consultation by Monday 23 February 2026 via our online survey.

Online response form[3]

Background

In 2019, the Bank of England’s Financial Policy Committee (FPC) assessed there was a mismatch between some funds’ redemption terms and the liquidity of their assets, which could potentially create systemic risk. The FPC made recommendations to improve the consistency of redemption terms and the liquidity of the funds’ assets.

In recent years, we have introduced new rules to improve funds’ liquidity management. The proposals in this consultation align with the FPC’s recommendations for AFMs to have anti-dilution tools and consider the liquidity costs when using them. 

In May 2025, the International Organization for Securities Commissions (IOSCO) published its recommendations[4] on fund liquidity risk management, which take account of the Financial Stability Board's (FSB) recommendations on the subject. We are now consulting on our proposals to tailor these to the UK market.