New EU legislation and regulatory guidance will come into force for managers of open-ended fixed income, equity and real estate funds on 16 April 2026. Under the regulation, funds must update their rules regarding the funds’ liquidity management tools.
The aim of the updated regulation is to improve investor protection and ensure that funds treat all investors fairly and equally, even in exceptional market conditions.
The regulation applies to all open-ended funds. Funds must define at least two liquidity management measures in their rules that comply with the new regulation. The Financial Supervisory Authority has published its own guidance on the regulation.
For this reason, eQ is also updating the rules of its equity, fixed income and real estate funds.
In eQ Equity and Fixed Income Funds, the liquidity management tools include the option, at the discretion of the fund, to apply redemption gates and an anti-dilution levy.
In eQ Real Estate Funds, the liquidity management tools include the option, at the discretion of the fund, to extend the notice period for redemptions and an anti-dilution levy. In addition, one method will continue to be the postponement of redemptions, if the liquidity for the redemption must be generated by selling the fund's assets and this has not been successfully completed before the redemption date.
The new liquidity management tools are not automatically applied to subscriptions and redemptions, but are applied on a case-by-case basis at the fund’s discretion. If a decision is made to apply these liquidity management tools, clients will be notified prior to the execution of the redemption
If a decision is made to apply a redemption gate or an anti-dilution levy, it will apply to redemption and subscription orders that have already been given but not executed, as well as to new orders. The extension of the notice period does not apply to orders that have already been given.
What the liquidity management tools mean:
Redemption gates (eQ Equity and Fixed Income Funds)
The fund may temporarily restrict redemptions if the net amount of redemption and subscription orders on the same day exceeds 5% of the fund's value. The excess will be carried over to the next redemption date.
Extension of notice period (eQ Real Estate Funds)
A redemption order must be made at least 6 months before the redemption date, as has been the case until now. In the future, this notice period may be temporarily extended to a maximum of 18 months if the interests of the unitholders so require.
Anti-dilution levy (eQ Equity, Fixed Income and Real Estate Funds)
An anti-dilution levy may be charged in connection with subscription or redemption. If the anti-dilution levy is decided to be activated, it may be set at 0-20% of the value of the units to be redeemed in eQ Real Estate Funds and at 0-2% in eQ Equity and Fixed Income Funds. The anti-dilution levy shall be based on the best estimate of the trading costs in the relevant market situation. The anti-dilution levy is paid to the fund, not to eQ Fund Management Company.
The purpose of the anti-dilution levy is to allocate trading costs fairly and protect the interests of all investors. At the same time, it replaces the redemption fee previously used in eQ Real Estate Funds (maximum 5%), which will not be charged in the future.
Cancellation of redemption orders
If the unitholder wishes, they can send a cancellation request for unexecuted redemption orders by email to eQ Asset Management's customer service or to their own contact person. The cancellation request must be submitted before the redemptions have been executed. eQ Fund Management Company decides whether to approve cancellations, and an approved cancellation will be confirmed separately by email to the unitholder.
If you have any questions, please do not hesitate to contact us, either to customer service or to your own contact person. We will be happy to provide further information and explain the changes in more detail.
eQ Customer Service: asiakaspalvelu(at)eq.fi, tel. +358 9 6817 8700.
