May 15, 2020

EU and Non-EU Managers of Luxembourg Funds: New CSSF Reporting Obligations

There have been a number of recent developments relating to notifications to be provided by alternative investment fund managers (AIFMs) and non-EU managers of Luxembourg funds with the view for the Luxembourg regulator to monitor the outbreak of COVID-19, its business impact and how it may affect the governance and performance of Luxembourg funds. The weekly reporting obligation of managers of Luxembourg funds as for their performance since 13 May 2020 can be found here.

That reporting is implemented at the manager level and provides only information on the total net assets of all funds under management of the same manager as well as the aggregate number relating to subscriptions and redemptions for all such funds, on a weekly basis.

We have not seen a crisis with such an abrupt halt to the global economy and immediate impact on employment. During the Great Recession of 2008, it took almost a year before effects on the funds industry started to emerge. Even as certain geographic regions start to lessen restrictions and re-open, the short-term and long-term economic impacts of COVID-19 are still unfolding with a great deal of uncertainty regarding how prolonged and severe they will be.

In this challenging context, the CSSF continues to support the funds industry by continuing to push for prevention rather than cure, identifying early potential liquidity concerns.

In this respect, the CSSF launched on 13 May 2020 a new reporting process to monitor AIFMs’ significant issues and larger redemptions. This new process applies beginning 2 June 2020 and only concerns AIFMs that have been contacted individually by email by the CSSF.

All AIFMs concerned by this new process must file, through the eDesk portal, information to the CSSF if one of the following events occur:

1. If significant events/issues affect the functioning of the Luxembourg funds managed by the AIFM as a result of the current period of market turbulence (e.g. liquidity issues on the asset side, significant valuation challenges including delays of NAV calculation, and changes in valuation methods).

This applies to regulated (UCITS, Part II UCI, SIF, SICAR) and non-regulated funds (e.g. RAIF) when the AIFM is Luxembourg based and only to regulated funds when the AIFM is not Luxembourg based.

2. If there is a large redemption of certain Luxembourg regulated funds (i.e. only UCITS, Part II UCI, SIF) managed by the AIFM and if at least one of the following conditions is met:

  • Daily net redemptions exceeding 5% of the NAV

  • Net redemption over a calendar week exceeding 15% of the net asset value

  • The application of gates / deferred redemptions

The CSSF expects to be notified about significant events, respectively large redemptions on a t+2 basis after the NAV date.

Further details on this new process, the related scope of application, and explanation assisting the managers filing in the notifications are outlined in the dedicated section of the CSSF eDesk portal homepage, which can be found here.