Where relevant, according to the predominant AIF type of the AIF, ESMA would see merit in NCAs’ requiring information on the Value at Risk (VaR) of the AIFs to be reported, in particular, as regards AIFs pursuing hedge fund strategies.
Where an AIFM reports the VaR of the AIF, ESMA would consider it appropriate for NCAs to require the VaR to be computed as of the last business day of the reporting period with an interval of confidence of 99% over a period of 250 days and with a 20-day holding period using either a Monte Carlo simulation or Historical simulation or a Parametric VaR.
Moreover, ESMA believes that, where relevant according to the investment strategy of the AIF, further information such as the portfolio’s sensitivity to a change in FX rates or commodity prices would constitute useful information to be required by NCAs.
Funds-Axis Impact Assessment:
In the AIFMD Annex IV 1.2 XML format, VAR is an optional field.
Should NCAs require VAR and other risk measures to be reported on a mandatory basis, this would require a relatively small amend in the required XML format. It is also useful that ESMA has recommended the relevant variable (confidence level, look-back and holding levels).
However, it is important that the caveat is maintained of requiring information “where relevant, according to the predominant AIF type of the AIF ….”.
For example, the UK does not require VAR Reporting “where relevant”, but instead requires it where the Value at Risk (VaR) is calculated for any other purpose (i.e. optional) (FUND 3.4.6A(1)).
For more details, see the Funds-Axis AIFMD Annex IV – Country Comparison Portal.