Fri, Apr 25, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

IOSCO publishes updated systemic risk data requirements for hedge funds

Thursday, March 22, 2012
Opalesque Industry Update - The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published an updated list of categories of data for the global collection of hedge fund information which it believes will assist in assessing possible systemic risks arising from the sector. The data categories were first published in February 2010 with the first IOSCO hedge fund survey in September 2011.

The Task Force on Unregulated Financial Entities (Task Force) has agreed to conduct a second hedge fund survey in September 2012, with responses expected by the end of the year. In support of this the Task Force has reviewed the categories of data used for the first survey and, based on lessons learned and recent legislative developments in the US and Europe, has amended the list of data it will collect for the second survey.

IOSCO believes that regular monitoring of hedge funds by securities regulators for systemic risk indicators/measures, such as size, interconnectedness and substitutability, will provide a vitally important time series of data that will help to monitor trends in hedge funds and therefore provide an invaluable insight into any potential systemic risks that hedge funds may pose to the global financial system.

Data Reporting Categories

The survey enables the collection of internationally consistent data which can be shared to facilitate international supervisory cooperation. The revised list below reflects the minimum that the Task Force will collect for the next IOSCO hedge fund survey. This is not a comprehensive list and regulators are not restricted from requesting additional information at a domestic level, based on their legislative and/or regulatory requirements.

There are 10 proposed categories of information which incorporate both supervisory and systemic data and build on the data collection recommendations set out in its final report on Hedge Fund Oversight.

1. General firm/advisor and fund information

• General firm/advisor information (e.g. firm name, firm reference number, authorities for which the firm is registered/authorised, number of qualifying hedge funds, firm assets under management (i.e. firm AUM, firm HF AUM)).
• Fund information (e.g. fund name, inception date, domicile, net asset value of total fund assets, net asset value of total strategy assets, predominant investment strategy).

Some of the aforementioned categories will not necessarily be provided to IOSCO in the reporting of aggregate exposures but are important for running a survey (e.g. firm and fund names).

2. Performance and investor information for each qualifying fund

• Recent performance details:

Periodic performance of fund assets (e.g. for each month) over the survey reporting period.
• Percentage of net asset value of fund assets below high water mark.
• Net asset value of fund assets by investor types (e.g. Financial institutions, high net worth individuals, fund of funds, etc).

3. Market and Product Exposure for strategy assets

• For each qualifying fund, details of the material positions in various asset classes split by:

• Securities: Value of Long and short positions in categories such as cash and cash equivalents, listed equities, unlisted equities, corporate bonds, sovereign bonds, convertible bonds, loans, structured/securitised products;
• Derivatives: Long and short CDS positions and the gross value of foreign exchange, interest rate derivatives, commodity derivatives and other derivatives;
• Physical (Real/ Tangible) Assets: Value of long positions in categories such as physical real estate, art and collectables, etc;
• Collective Investment Undertakings: Value of long positions in categories such as money market funds;
• Value of investments in other hedge funds and parallel managed accounts; and
• Investments in other asset classes: Value of long and short positions.

For some of the aforementioned products, e.g. listed equities, there may be a request for a geographic split of assets.

4. Geographical focus

• For each qualifying fund, details of the regional investment focus.

5. Turnover/ number of transactions

• For each qualifying fund, value of turnover in each asset class over the reporting period.

6. Trading and clearing

• Estimated percentage of :

• Securities traded (in terms of market value) - OTC vs. exchange traded;
• Derivatives traded (in terms of trade volumes) - OTC vs. exchange traded;
• Derivative transactions cleared (in terms of trade volumes) - by a CCP vs. bilaterally; and
• Repo trades cleared (in terms of market value) - by a CCP vs. bilaterally vs. tri-party.

• Information on primary CCPs.

7. Leverage and risk

• Value of borrowings by source i.e. unsecured borrowing, collateralised borrowing (via prime brokerage and/or repo), synthetic borrowing (e.g. CFD, TRS).
• Amount of unencumbered cash
• Various risk measures used by hedge fund managers (e.g. net DV01, net CS01 and net Equity Delta, which measure a portfolio’s sensitivity to movements in interest rates, credit spreads and equity prices).

8. Liquidity risk

• Details of portfolio, investor and financing liquidity

• Ability to gate or suspend funds and any restrictions currently in place.
• Fund assets subject to special arrangements arising from their illiquid nature.

9. Counterparty risk

• Primary counterparties in terms of net counterparty credit exposure.
• Extent of rehypothecation of collateral and other credit support by counterparties.

10. Other information

• Concentration (e.g. principal markets in which trading can represent a significant proportion of overall daily volume, top ten positions as a % of gross market value).
• Portfolio complexity (e.g. number of open positions).

The original list was developed by the Task Force on Unregulated Entities (Task Force) following requests from the Financial Stability Board (FSB) as well as from IOSCO members.

(press release)

www.iosco.org

BG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Rainwater and Blue Sky - an Australian water fund emerges[more]

    Bailey McCann, Opalesque New York: Financial reporters often tout new funds and investments as uncorrelated investments, but few can say they are uncorrelated to everything but weather. Enter Blue Sky Alternative's water fund which invests in the permanent rights to Australia's water. Sev

  2. Regulatory – Expect greater SEC scrutiny of hedge funds that share information or collaborate in advance of their trades, Alternative funds to get SEC test for leverage, liquidity[more]

    Expect greater SEC scrutiny of hedge funds that share information or collaborate in advance of their trades From Thelawyer.com: A recent Wall Street Journal article — ‘Activist investors often leak their plans to a favoured few’ — focused attention on ‘activist’ investors and stock analy

  3. …And Finally – This week's least competent criminal is Austrian[more]

    From ABCnews.go.com: A German sought by authorities for alleged fraud has been arrested in Austria — after dropping into a police station to ask officers whether he was under investigation. Police in Salzburg said the 59-year-old man walked into a police station in the city on Friday night. Sp

  4. Investing – Hedge funds find pitfalls along with profits in real estate ventures, Marcato Capital Management makes new bet on Dillard’s[more]

    Hedge funds find pitfalls along with profits in real estate ventures From Law360.com: Hedge funds have joined the rush to real estate deals and development in recent months to close the financing gap left by tightening bank standards, but attorneys say many aren't prepared for the disclo

  5. Agecroft Partners estimates 90% of hedge funds using social media[more]

    The use of social media has increased significantly within the hedge fund industry over the past couple of years. Social media is broadly used by investors as part of their due diligence process on hedge funds, by service providers in their sales efforts to hedge funds, and by hedge funds to enhance