Singapore: MAS Strengthens Liquidity Risk Management Framework for Fund Managers

MAS has issued a consultation paper proposing updates to the Guidelines on Liquidity Risk Management Practices for Fund Management Companies (“LRM Guidelines”) to provide greater clarity on MAS’ expectations on the management of liquidity risks following global financial market events and market volatility. These updates are intended to align the LRM Guidelines with the IOSCO Final Report on Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes issued in May 2025 and the Financial Stability Board’s Final Report on Liquidity Preparedness for Margin and Collateral Calls published in December 2024. 

Key updates to the LRM Guidelines

1. Removal of Exchange-traded funds (“ETFs”) from scope – In line with IOSCO’s recent guidance, MAS clarifies that the updated LRM Guidelines will no longer apply to ETFs, given their distinct liquidity considerations and structural features as compared to open-ended collective investment schemes (“CIS”). 

2. Alignment between redemption terms and liquidity of fund assets – Fund management companies (“FMCs”) managing open-ended CIS should maintain consistency between investment strategy and redemption terms at the product design and on an ongoing basis. FMCs should not provide frequent redemption (e.g. daily or weekly) for schemes holding a significant proportion of illiquid assets, and should ensure adequate disclosure on asset illiquidity and redemption terms. 

3. Adoption of anti-dilution liquidity management tools (“ADT”) – FMCs should adopt a diversified approach to liquidity management, considering ADTs alongside quantitative-based tools such as suspension or gating. FMCs managing open-ended CIS that invest mainly in less liquid assets must implement at least one ADT. 

4. Incorporation of explicit and implicit costs into redemption cost – To safeguard investors' interests especially during times of market stress, an FMC should have in place appropriate arrangements so that investors who subscribe or redeem bear the liquidity costs associated with their transactions. 

5. Strengthening governance and enhancing disclosures on design and use of liquidity management tools – An FMC should set out the circumstances under which liquidity management tools may be activated and define the roles and responsibilities of the decision makers overseeing the design and use of such tools. Disclosures on the design and use of liquidity management tools must be meaningful and consistent.

6. Holistic assessment of liquidity risks – An FMC should consider all potential sources of liquidity risks applicable to the CIS (e.g. margin calls during adverse market movements or settlement and operational delays in converting assets to cash) and incorporate the assessment of such risks in their liquidity risk management. 

Updates to the Code of Collective Investment Schemes (“CIS Code”)

MAS also proposes to update the CIS Code to strengthen portfolio liquidity in money market funds ("MMFs") by introducing expectations on eligible deposits that are placed with financial institutions. MAS intends to set out a guidance note on the definition of “eligible deposits” to clarify that they are expected to be repayable on demand or with the right to be withdrawn by the MMF at any time. The MMF should also consider pertinent factors such as penalties or other costs associated with early withdrawal of deposits.

Next steps

The consultation closes on 28 February 2026. MAS proposes that the updates to the LRM Guidelines and CIS Code come into effect six months after the revised LRM Guidelines are published.