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AIFMD Updates: Leverage monitoring & reports

Posted by Andrew White on Apr 23, 2013

*This blog was updated in June 2020.

AIFMD had to be transposed by Member States by 22 July 2013. Here we provide an overview of the directive. 

Leverage Calculation and monitoring

AIFMD mentions three methods for calculating leverage -

1. Gross method: Which is calculated as the absolute value of all positions plus the market value of the equivalent underlying position for derivatives.

2. Commitment method: Which is similar to the Gross Method but allows for some netting and hedging arrangements to reduce the exposure. This method is based on the UCITS method and calculates exposure as described in the CESR Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS.

3. Advanced method: Which is more flexible and allows for further offsetting positions and the use of maximum loss measures.

Calculating the "Regulatory assets under management" (RAUM)

To determine if an AIF is above the relevant thresholds for disclosure, derivatives must be converted into the absolute value of the equivalent underlying position. 

Generating the report to be filed with the competent authority

ESMA set out in Annex V of the Level 2 document a template for the information that the AIFM will need to submit for each AIF. It's a bit of a beast to be honest and includes static information (AIF Name, Inception date etc.), asset class breakdown (getting quite granular with sections such as "EU Sovereign bonds with a 0-1 year term to maturity"), turnover, currency exposure, counterparty exposures and much much more:

Unfortunately we no longer support our AIFMD solution, but if you'd like to automate your compliance processes and join the world's largest compliance community then check out our Shareholding Disclosure service. We also offer automated services for Position Limits and Sensitive Industries. Don't hesitate to get in touch if you'd like to see any of these in action!