The Malta Financial Services Authority published findings from a thematic review of management companies of Alternative Investment Funds and UCITS, identifying weaknesses in how firms execute the investment management function and manage liquidity risk. Alongside the review, the MFSA issued a Dear CEO letter setting expectations for stronger governance, improved oversight, and more robust integration of liquidity considerations within investment processes. Key shortcomings included inadequate record keeping, unrealistic assumptions in liquidity stress testing, weak suitability assessments for Investment Committee members, limited follow-up on issues raised by control functions, and insufficient integration of environmental, social, and governance risks into investment strategies. The review also noted areas of good practice, including confirmation from 87% of management companies that they conduct pre-trade liquidity checks on prospective investments, and the use of structured monitoring approaches such as redemption coverage ratios to assess funds’ ongoing liquidity profiles. The MFSA indicated it will continue to monitor developments through ongoing supervision and provide further support through guidance, supervisory meetings, and additional reviews.

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