EFAMA calls for global regulatory measurements of funds’ risk exposure

risk graph blackboardEFAMA and AMIC have called for global regulatory measurements to be put in place to better determine funds’ exposure to leverage and risk.

In a joint report covering investment funds in Europe, published today, the European Fund and Asset Management Association and the Asset Management and Investors Council assess the Ucits and Aifmd legislative frameworks and how they monitor leverage risks.

The report found the EU regulatory framework to be “sound and efficient” in recent years, with European regulators in a position to take supervisory actions, leverage levels remaining constant and no related systemic risk.

However the trade and regulatory bodies suggested further moves to “improve monitoring and analysis of leverage risk”, including the development of global leverage and risk measurements.

“This would allow a meaningful representation of a fund’s exposures, given that there is no single measure that can capture all the risks in nature, size and characteristics associated with a fund’s underlying assets and strategies,” the report says.

Other recommendations include improving data sharing among regulators both in the EU and globally, and updating the methods used for the global calculation of leverage and risk, such as the 2010 CESR guidelines.

Peter de Proft, EFAMA director general, says: “EFAMA and ICMA consider that the existing EU regulatory framework is regulating in a consistent way the use of leverage in investment funds, along with key related topics, such as: the mandatory disclosures to investors, the reporting requirements to the regulators and the monitoring of leverage by regulators for systemic risk purposes.

“We firmly believe European regulation is a cutting-edge framework at global level, and hope that IOSCO and FSB regulators use it as the benchmark and starting point for their work. This will allow them to deliver their mandate and propose a consistent matrix of different measures that can capture the broad universe of fund vehicles and investment strategies.”