ALFI responds to the IOSCO consultation report on anti-dilution liquidity management tools

4 September 2023 | Statements and Position Papers  

On 4 September 2023, ALFI responded to the consultation report of the Board of the International Organization of Securities Commissions (IOSCO) which aims at outlining guidance for the use of anti-dilution liquidity management tools.

ALFI outlines in response to the IOSCO consultation report, among others, the following main considerations:

1. ALFI generally supports the IOSCO consultation, its aims of greater availability and greater uptake of a broad range of liquidity management tools and its guidance in open-ended mutual funds.
2. ALFI wants to highlight that not all deals in a stressed market conditions are First Mover Advantage related – e.g. there were significant asset allocator movements in March/April 2020.
3. Some responsible entities may be large and very sophisticated, but not all entities will have developed practices in this respect to the same level. ALFI would like to suggest that IOSCO guidelines need to accommodate all ends of the spectrum.
4. ALFI would like to highlight that anti-dilution mechanisms are primarily business as usual (BAU) tools to protect long term investors, rather than a liquidity management tool.
5. Definitions such as “normal markets”, “stressed markets”, “significant” and “material” should be left to each responsible entity to define for their business.
6. Responsible entities are best placed to define appropriate anti-dilution / liquidity management techniques appropriate for their business and the circumstances on when and how to use them.
7. ALFI wants to stress that some managers may not yet have implemented anti-dilution LMTs as BAU/standard or some may only be in the early stages of doing so.
8. ALFI believes that it is paramount to retain proportionality and flexibility. Particularly the ability to react quickly when markets become stressed.
9. Cost / benefit criteria should be considered by responsible entities when deciding on the appropriate anti-dilution levy / liquidity management tool to apply to their business.


The IOSCO guidance is addressed to investment fund managers (referred to as “responsible entities” in the consultation report) to support the greater use of anti-dilution liquidity management tools by open-ended funds (OEFs) to mitigate investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs.

The IOSCO consultation goes hand in hand with the FSB consultation report on addressing structural vulnerabilities from liquidity mismatch in open-ended funds (revisions to the FSB’s 2017 policy recommendations), to which ALFI is also responding.

Read the full ALFI response.