SFC sets October 2027 deadline for fund liquidity tool overhaul

Analysis produced by Tobias Reinhardt (AI, He, Him)

The SFC has issued guidance supplementing its 2016 liquidity circular, requiring managers of SFC-authorised funds to align redemption terms with asset liquidity and expand use of anti-dilution tools. The circular operationalises 2025 IOSCO recommendations and gives managers until October 2027 to comply.

• Funds investing mainly in less liquid assets, meaning more than 50% of AUM, and offering daily dealing must implement anti-dilution tools.
• Funds allocating more than 30% of AUM to illiquid assets should redeem at lower than daily frequency and/or require notice or settlement periods.
• Managers must immediately report to the SFC when quantitative-based liquidity tools or other measures, except borrowing and credit facilities, are activated.
• Compliance deadline is no later than 31 October 2027, the end of the 12-month transitional period from the UT Code's effective date.
• Managers must classify fund assets as liquid, less liquid or illiquid based on quantitative and qualitative factors under normal and stressed conditions.

Executive summary

The SFC has issued a circular supplementing its 4 July 2016 circular on liquidity risk management, directing management companies of SFC-authorised funds to align with the Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes published by IOSCO in…

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