Brown Brothers Harriman announced a new automated liquidity management tool (“LMT”) for traditional and alternative funds, which allows asset managers to supervise multiple fund liquidity scenarios based on investor flows in a fully digital, customizable and controlled environment.

LMT receives real-time transactional feeds and proactively notifies asset managers in case their custom thresholds have been exceeded. LMT supports liquidity management for fund structures with liquid and illiquid assets and can be adjusted and customized to various fund cycles and cut off times.

Accessed through BBH’s client portal Infuse TA, asset managers can now simulate within LMT and manage their liquidity decisions online. Trades can be accepted as instructed or adjusted on an individual basis or at fund level, with automatic STP cancellations and new STP instructions to support the newly accepted cash flow. 

LMT not only provides online projections for the fund’s liquidity needs, but it also provides asset managers with a tool to use to fulfill the growing requirements from regulators around liquidity transparency. The latest Financial Stability Board recommendations FSB Revised Policy Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds, 20 December 2023, ELTIF 2.0 regulation Regulation (EU) 2023/606 of The European Parliament and of The Council of 15 March 2023, and European Securities and Markets Authority draft regulatory technical standards ESMA Draft regulatory technical standards under the revised ELTIF Regulation, 19 December 2023 call for well-established and documented processes using defined and tested liquidity management tools and procedures. Furthermore, the International Organization of Securities Commissions OR01/24 Update to IOSCO 2023-24 Work Programme – March 2024 – March 2025 Workplan has prioritized LMTs as a 2024 focus area and the Central Bank of Ireland announced a thematic review and questionnaire for 2024 Irish Funds Weekly Update – Friday 12 April 2024.

“General spikes of market volatility, as well as risk of higher market volatility due to geopolitical tensions and world events such as COVID-19, have highlighted the importance of automation in liquidity management for risk mitigation and to preserve financial stability,” said Manuel Dienhart, Global Head of Transfer Agency at BBH. “LMT will offer managers a digital solution to manage their funds’ liquidity. It takes what was once a manual and risky offline process, and turns it into straight through automation, helping managers meet regulators’ expectations.”

Further driving the demand for an automated liquidity management tool is the growing interest among managers in ELTIF 2.0, LTAF and evergreen funds, which are open-ended structures that offer high net worth and retail investors exposure to private market asset classes that have traditionally been harder to access. According to BBH’s 2024 Fund Distribution Outlook survey, 50% of asset managers plan to go to market with ELTIFs and LTAFs in the next 3 years.

“Semi-liquid, open-ended structures put liquidity management into finer focus, especially through a regulatory lens when offering liquidity within a fund holding largely illiquid assets,” said Lata Vyas, Head of European Alternative Funds Product at BBH. “For asset managers, GPs and Management Companies who oversee these portfolios, establishing an appropriate redemption policy and managing the ongoing liquidity needs of a broad spectrum of investors requires tools to be in place that are visible to regulators.”

 BBH’s LMT utilizes API technology and is integrated with BBH Infomediary, an open-architecture data integration and messaging engine, and currently available for Transfer Agency clients.

Source: BBH