On 7 July 2023, the FCA published the detailed findings and good practice from its multi-firm review of liquidity management frameworks in asset managers. The FCA also noted that it had written to the sector in a companion Dear CEO letter.


In November 2019, the FCA issued a letter to the Boards of Authorised Fund Managers, detailing good practice in liquidity management. This review assesses firms’ progress in implementing effective liquidity management frameworks – the FCA wanted to see what improvements had been made since 2019 and what weaknesses remained.

The FCA chose a sample of 14 firms of different sizes for this review. It asked those firms to provide information on their liquidity management frameworks and followed up with in-depth discussions on their methodologies.

Although the review focuses on authorised fund managers, the FCA expects all asset managers and managers of Alternative Investment Funds to consider the findings for their businesses. Property funds were not subject to this review.

Key findings

The review found that, while some firms demonstrated very high standards, with the review highlighting good practices seen, there was a wide disparity in the quality of compliance with regulatory standards and depth of liquidity risk management expertise. A minority of firms in the review had inadequate frameworks to manage liquidity risk.

The review found the following:

  • The building blocks and tools for effective liquidity management were usually in place at firms, but these lacked coherence when viewed as a full process and were not always embedded into daily activities.
  • Many firms attach insufficient weight to liquidity risk management in their governance oversight arrangements, as well as insufficient challenge and escalation, particularly in volatile environments.
  • A wide range of approaches to liquidity stress testing with some methodologies insufficient to assess actual liquidity of the portfolio, using assumptions that were not appropriately conservative. For example, some firms’ models assumed that they would always sell the most liquid assets, without ever giving regard to the liquidity of selling a ‘vertical slice’ of the portfolio.
  • Firms typically had governance and organisational arrangements in place to meet large one-off redemptions but did not have sufficient arrangements in place to oversee cumulative or market-wide redemptions that could have a significant impact on a fund.
  • Wide variations in the application of anti-dilution tools such as swing pricing, which could affect the price investors receive when redeeming.

The FCA noted that asset managers should take account of the findings, as many of the examples of good practice highlighted in the review and letter contribute to improved consumer outcomes and are consistent with the Consumer Duty, which comes into force on 31 July.