ESMA agrees with investment restrictions on GBP LDI funds in Ireland and Luxembourg

Summary:

The European Securities and Markets Authority (ESMA) has issued advice to the Central Bank of Ireland (CBI) and the Commission de Surveillance du Secteur Financier (CSSF) regarding investment restrictions for GBP Liability-Driven Investment (LDI) funds to ensure their resilience. The CBI and CSSF intend to impose an investment restriction on Alternative Investment Fund Managers (AIFMs) established in Ireland and Luxembourg managing GBP-denominated AIFs pursuing a LDI funding strategy. The restriction requires GBP LDI funds to be able to resist a rise in GBP yields of at least 300 basis points. ESMA has concluded that the conditions for taking actions under the Alternative Investment Fund Managers Directive (AIFMD) are met, and the measures proposed are justified and should contribute to improving the resilience of EU GBP LDI funds. The measure will apply from April 29, 2024, with a three-month transitional period for existing GBP LDI funds.