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FAQ

AIFMD Risk Measure Type Validations

This only concerns authorised (non-light) funds.

Risk Measure Type (AIF Question 138)

There are 7 Risk Measure Types [138] that can be reported, of which four must always be present in the AIFMD report. This is actively monitored by the ESMA since 2022.

Risk MeasureRisk Measure Type [138]
Net Equity DeltaNET_EQTY_DELTAMust be present
Net DV01NET_DV01Must be present
Net CS01NET_CS01Must be present
Vega exposureVEGA_EXPO
VARVARMust be present
Net FX DeltaNET_FX_DELTA
Net Commodity DeltaNET_CTY_DELTA

For our template this means that four RISK records must be added for each fund.

What to do if a mandatory risk measure is not applicable to a fund?

if a mandatory risk measure is not applicable to a fund, a dummy record with a zero value must be reported. The reasons should be explained in the Risk Measure Description [147].

How does Matterhorn help?

When our software determines based on the Sub-Asset Types in the fund that a mandatory Risk Measure is not applicable, the software automatically inserts a dummy RISK record for that Risk Measure. A dummy record will only be inserted when the template does not already contain a RISK record for the Risk Measure.

The dummy record has all values set to zero and the following description:

Risk MeasureRisk Measure Type [138]Description [147]
Net Equity DeltaNET_EQTY_DELTANot applicable given AIF’s predominant type.
Net DV01NET_DV01Not applicable given AIF’s predominant type.
Net CS01NET_CS01Not applicable given AIF’s predominant type.
VARVARNot required by the Reporting Member State pursuant to Article 24(5).
  • The description for Net Equity Delta, Net DV01 & Net CS01 comes from ESMA AIFMD Q&A Question 86, see below.
  • The description for VAR stems from the fact that no reporting member state requires it yet {see AIFMD Directive 2011/61/EU - Article 24(5)}.
  • Please feel free to change the description by adding a RISK record to the template.

How does Matterhorn determine the applicability of a Risk Measure?

As the VAR is not yet required by any reporting member state the dummy record for VAR is always added when a VAR record is not present in the input template.

For the other risk measure types, our software checks all POSITION records for the following Sub-Asset Types [65]:

Risk MeasureRisk Measure Type [138]Applicable for Sub-Asset Types [65]
Net Equity DeltaNET_EQTY_DELTAListed & Unlisted Equity, Equity Derivatives, ETFs, Other CIU.
Net DV01NET_DV01Bonds, Fixed income derivatives, Interest rate derivatives.
Net CS01NET_CS01Bonds, Fixed income derivatives, Interest rate derivatives.

If no applicable Sub-Asset Type is found, the dummy record is added. Otherwise, a record must be added to the input template.

Relevant articles from the ESMA:

Explanation on Risk measure type NET DV01 by the ESMA AIFMD Q&A:

Question 84 [last update 28 May 2021]:

Which risk is measured by NET DV01? How shall it be reported?

Answer 84 [last update 28 May 2021]:

Net DV01 should be the value change in price (value) of a portfolio and measures the portfolio’s sensitivity to a change in the yield curve. Assume an increase of 1bp in the risk-free rate curve (assume a parallel shift) at the end of the reporting period. The effect on the total net asset value of the AIF (taking into account all the positions (including derivative positions) of the portfolio) shall be reported as a monetary value in base currency for each maturity bucket (< 5 years, 5-15 years and >15 years) as specified in data fields 140-142. Report: (i) a negative value if the variation of the net asset value is negative; (ii) a positive value if the variation is positive and (iii) a zero if the AIF is neutral or not exposed at all to this risk. In case a measure of risk is not applicable for an AIF or when AIFM report a zero value, the reasons should be explained in the „Risk Measure Description” (data field 147). As indicated in the Guidelines, DV01 is defined as in ISDA definition.

For example, assume an AIF with NAV of 100M EUR encountering the following portfolio decline after a general increase of 1bp in the risk-free yield curve: 0.01%, decline for maturity bucket <5 years, 0.02% decline for maturity bucket 5-15 years and 0.03% decline for maturity bucket >15 years. Then for these maturity buckets it should report, in base currency, respectively: “-10000”, “-20000” and “-30000”.

Explanation on Risk measure type NET CS01 by the ESMA AIFMD Q&A:

Question 85 [last update 28 May 2021]:

Which risk is measured by NET CS01? How shall it be reported?

Answer 85 [last update 28 May 2021]:

Net CS01 measures the portfolio’s sensitivity to a change in credit spreads. Assume a general increase in all credit spreads of 1bp at the end of the reporting period. The effect on the total net asset value of the AIF (taking into account all the positions (including derivative positions) of the portfolio) should be reported as a monetary value in base currency for each maturity bucket (< 5 years, 5-15 years and >15 years) as specified in data fields 140-142. Report: (i) a negative value if the variation of the net asset value is negative; (ii) a positive value if the variation is positive and (iii) a zero if the AIF is neutral or not exposed at all to this risk. In case a measure of risk is not applicable for an AIF or when AIFM report a zero value, the reasons should be explained in the “Risk Measure Description” (data field 147). As indicated in the Guidelines, CS01 is defined as in ISDA definition.

For example, assume an AIF with NAV of 100M EUR encountering the following portfolio decline after a general increase of 1bp in all credit spreads: 0.01%, decline for maturity bucket <5 years, 0.02% decline for maturity bucket 5-15 years and 0.03% decline for maturity bucket >15 years. Then for these maturity buckets it should report, in base currency, respectively: “-10000”, “-20000” and “-30000”.

Explanation on Risk measure type Net Equity Delta by the ESMA AIFMD Q&A:

Question 86 [last update 28 May 2021]:

Which risk is measured by Net Equity Delta? How shall it be reported?

Answer 86 [last update 28 May 2021]:

Net equity delta is used to analyse portfolio’s sensitivity to movements in equity prices. Assume all equity prices the AIF is exposed to decline by 1% at the end of the reporting period. Report the effect on the total net asset value of the AIF (taking into account all the positions (including derivative positions) of the portfolio) as a monetary value in base currency. In the case of derivative positions, a decline of 1% in the value of the underlying should be considered, and not in the value of the derivative. Hence, it shall report: (i) a negative value if the variation of the net asset value is negative; (ii) a positive value if the variation is positive and (iii) a zero if the AIF is neutral or not exposed at all to this risk. In case a measure of risk is not applicable for an AIF or when AIFM report a zero value, the reasons should be explained in the “Risk Measure Description” (data field 147).

Example:

  1. Assume at the quarter-end that the NAV sensitivity of an AIF to a 1% equity price decline is -0.5% and that its NAV is 100M EUR, then the figure to be reported under the field “net equity delta” would be “-500000”.

  2. Assume the AIF is fully exposed to fixed-income instruments, then a zero would be reported under the field “net equity delta” and “Not applicable given AIF's predominant type” would be reported in the Risk Measure Description field (147).

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