| NAV | DERIVATIVE EXPOSURE | |
|---|---|---|
| CASH | 900 | |
| EQUITIES | 10,900 | |
| DERIVATIVES | -1,000 | 9,000 |
| NAV | 9,000 |
This example is the same as example 3 above, except that now the fund has borrowed £900 cash and invested into equities, taking an additional £900 of exposure.
AIFMD COMMITMENT EXPOSURE
The AIFMD approach is that that commitment exposure is 221.11% (121.11% incremental leverage). This is calculated as 10,900 equities + 9,000 derivatives / 9,000 NAV.
As per AIFMD Regulation, Schedule 3, Annex 1 – methods of increasing exposure, to avoid double counting, cash borrowings that are used to finance the exposure shall not be included within the calculation.
UCITS GLOBAL EXPOSURE
The UCITS Global Exposure calculation for the above example is exactly the same as in Example 3 – £9.000 derivatives exposure / £9,000 NAV = 100%, again in compliance with the 100% global exposure limit.
FUNDS-AXIS VIEW
The AIFMD Commitment Exposure calculation is preferable. The UCITS Global Exposure calculation ignores the fact additional leverage has been introduced through the use of borrowing, as compared to example 3.
The UCITS calculation would calculate the UCITS Global exposure as 100%, compared to an AIFMD Commitment exposure calculation of 121% incremental leverage. This is a large difference.
In our view, the appropriate calculation is 121%. Further, it is clearly not helpful to investors to have a calculation of Global Exposure on Example 3 which is the same as in Example 4, when Example 4 clearly has more leverage.
