Guidelines

The vehicle’s constitutional and marketing documentation should include liquidity rights of the investor and how and when to execute these rights, in both normal and exceptional circumstances, as well as detailed consideration of the exit strategy, and existing redemption arrangements.

The fund documentation should include a liquidity protocol document explaining how all investors will be treated in different liquidity events including new equity (or debt) issues, redemptions, secondary market transfers and exit. This document should be reviewed and updated throughout the life of the vehicle and made available to both existing and prospective investors.

The vehicle’s constitutional documents should include a statement of risk factors relating to liquidity. These should include as a minimum an analysis of the potential impact on the investors’ interest if the manager exercises its rights in full to either defer payment or adjust the price payable on redemption. For open end vehicles the risks associated with the vehicle not reaching the optimal size should be clearly set out, with particular reference to the impact on portfolio construction and any liquidity events.

Investment managers should ensure that all documentation relating to liquidity is fit for purpose.

Investors should ensure they fully read all relevant vehicle documentation and material provided as part of the liquidity process.