On 22 April 2016, the CSSF released a new circular letter which requires UCITS funds to complete and file a substantial new reporting template related to the risk and risk management of UCITS funds.
The letter addresses all UCITS, but the major reporting requirements apply only to the ones that fulfil the conditions below. Those that do fall within the full scope face a new, major reporting challenge, as the first report must be filed by 16 May 2016. Given the level of detail requested by the circular, quick action is an absolute must.
Full-scope reporting applies to those UCITS that either have more than €500 million total net assets (TNA), or that use the value-at-risk (VaR) method for calculating their global exposure and have an arithmetic average leverage over the reference semester greater than or equal to 250% of the UCITS' total net assets.
Challenging reporting requirements
The following is a non-exhaustive list of the information that will need to be submitted:
- leverage per risk factor (sum of notional amounts; optionally: commitment)
- sum of notional amounts per derivative category
- % liquidity per time bucket
- % shareholdings of the UCITS per sector classification
- debt portfolios only: % TNA per rating class (1, 2, 3, ...10)
- debt portfolios only: % TNA per credit spread bucket
- % TNA per type of credit-linked instruments
- new stress tests / sensitivities
- minimum/maximum/arithmetic average use of EPM techniques such as [reverse] repos and securities, lending/borrowing and cash borrowing
- details of counterparty exposures (e.g. the three largest counterparty exposures) and collateral from EPM and OTC derivatives
Asset managers will need to dig deep into their systems and their available data to retrieve the required information. Some may not be able to gather and generate all of it within the short deadline given for the first report, and as the circular asks for this information to be generated continually, asset managers may have difficulty producing it in an efficient manner.
What's the next step?
With our vast experience in risk management and our ability to leverage on our smooth-running AIFMD reporting factory, we can advise you on finding and preparing the information needed to comply with the CSSF circular letter on UCITS risk reporting. We can also take over any and every step of the reporting process, from helping you extract the data, to crunching the numbers, calculating risk figures and breaking them down, and seeing to the final dissemination of the reports. Don't hesitate to contact us or visit our webpage!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
