EU – UCITS and AIFMD Exposure Concepts

Introduction to UCITS and AIFMD Exposure Concepts

Following the EU Directives on UCITS and AIFMD and ESMA’s guidelines on the same, there are now 5 different calculations of exposure required.

Additionally, there is a lack of clarity across the calculations on certain issues such as the treatment of share class FX, margin and borrowing.

These are considered below.

Funds-Axis suggestions for clarification and change are set-out here. This includes reduction of the number of calculation methods to only 3 measures of exposure.

OVERVIEW OF EXPOSURE CALCULATIONS

* For AUM, you do not include investment in group CIS

**In practice, regard needs to be had to the entirety of the portfolio.

The key regulatory documents in this regard are:

CESR 10-788: CESR’s Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (the UCITS Guidelines);
ESMA’s Guidelines on ETFs and other UCITS Issues; and
AIFMD Regulation.

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