Authors
Introduction
In December 2025, the Monetary Authority of Singapore (MAS) released a consultation paper proposing enhancements to liquidity risk management practices for fund management companies (FMCs). The proposals seek to strengthen investor protection and align Singapore’s framework with international standards.
Applicability
The Guidelines on Liquidity Risk Management Practices for Fund Management Companies (LRM Guidelines) will continue to apply to FMCs managing open-ended collective investment schemes (CIS) authorised by MAS, with tailored application for closed-ended CIS and CIS with lock-up periods.
Exchange-traded funds will be excluded from the scope of the LRM Guidelines as they have structural features distinct from other types of CIS.
Key proposed updates
Governance
Governance is a core pillar of liquidity risk management, with boards and senior management expected to exercise effective oversight and ensure clear accountability within FMCs.
Under the proposed updates to the LRM Guidelines:
- FMCs should establish clear accountability and decision-making processes by setting out the circumstances under which liquidity management tools may be activated and defining the roles and responsibilities of the decision makers.
- The board and senior management of an FMC are expected to have an adequate understanding of potential interactions between liquidity risk and other risk types (credit, market, operational, etc.) and consider these interactions in their decision-making processes.
Initial design of product
The MAS also seeks to clarify in the updated LRM Guidelines that FMCs should consider, in the initial design of the CIS, the following:
- Margin and collateral calls: Liquidity risks associated with margin and collateralised transactions, including factors such as: (a) the size and type of margined and collateralised activities; and (b) the concentration of exposures across different asset classes and counterparties.
- Consistency between investment strategy and redemption terms: In addition to the dealing frequency of the CIS, notice and settlement periods for redemption to reflect the overall liquidity of the underlying assets under both normal and stressed market conditions.
FMCs should adopt a diversified approach to liquidity management and consider the use of both quantitative-based tools (such as redemption gates or suspension) to limit available liquidity, and anti-dilution tools (such as swing pricing) to pass on the estimated costs of liquidity to transacting investors.
Liquidity costs associated with subscriptions and redemptions (such as explicit and implicit transaction costs) should be borne by transacting investors, particularly during periods of market stress.
Offering documents should also include clear disclosures on: (a) liquidity risks; (b) redemption features and available liquidity management tools, including when those tools may be activated; and (c) the impact of these features and tools on investors’ redemption rights, to enable investors to assess whether a CIS’ liquidity profile aligns with their risk appetite.
Ongoing liquidity risk management
Liquidity risk management is an ongoing process, with FMCs expected to monitor investor profiles, redemption patterns, and asset liquidity, and establish internal liquidity thresholds as early warning indicators. Regular reviews should also be performed to assess the effectiveness of liquidity tools applied and whether additional tools are required to manage liquidity mismatches and ensure fair treatment of all investors.
Stress testing
In performing stress tests on CIS, the updated LRM Guidelines encourage FMCs to holistically consider all stress factors, including market shocks leading to margin and collateral calls by multiple counterparties and the knock-on effects on the FMC arising from actions taken by counterparties experiencing liquidity stresses.
Money market funds
MAS also proposes to clarify in the Code on Collective Investment Schemes that “eligible deposits” for money market funds should be repayable on demand or withdrawable at any time. Money market funds should also consider any penalties or costs associated with early withdrawal.
Feedback and next steps
MAS invites feedback from interested parties on the proposed updates. The consultation closes on 28 February 2026.
Conclusion
The proposed updates reflect MAS’ continued focus on strengthening liquidity risk management and investor protection for collective investment schemes.
By clarifying expectations at the product design stage and across ongoing liquidity risk management, governance, disclosures, and stress testing, MAS aims to promote more resilient fund structures under varying market conditions.
Client Alert 2026-014