An AIFM must implement a risk management system appropriate to identifying, measuring, managing and monitoring all of the risks relevant to the investment strategy of each AIF under management and to which each AIF may be exposed. The risk management function must be hierarchically separate from the AIFM’s operating units and must be reviewed at least annually and adapted as necessary. The particular risks posed by the use of leverage - both at the level of the AIF and on the systemic level - must also be taken into consideration. In fact, the AIFM is bound to set a maximum limit to the measure of leverage that may be employed on behalf of each AIF under management.
Risk Management - Minimum requirements of AIFM
- Implement an appropriate due diligence process
- Ensure that risks can be identified, measured, managed and monitored on an ongoing basis (including through stress testing procedures)
- Ensure that the risk profile of each AIF is appropriate to its size, portfolio structure and investments strategies
Risk Management - Factors to be taken into account in setting leverage limits
- The type of AIF and its investment strategy
- The AIF's sources of leverage
- Any interlinkage/relevant relationships with other financial institutions
- The need to limit exposure to any one counterparty
- The extent to which the leverage is collateralised
- The asset-liability ratio
- The scale, nature and extent of the AIFM's activity in the market concerned
We oversee all responsibilities associated with the assessment, monitoring, and review of your funds risk and providing regular updates to the fund’s governing body.
- Implementing effective risk management policies and procedures
- Setting risk profile and limits
- Ensuring that risk limits always remain in accordance with the risk profile the fund discloses to investors
- Monitoring adherence to risk limits
- Risk Committee