UCITS Risk Reporting€¦ · 1.1 - Overall UCITS population and full reporting scope. 3. 1.2 - Coverage rate by investment policy type and by global exposure calculation method. 3

UCITS Risk Reporting 1 July to 31 December 2018

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UCITS Risk Reporting - 31 December 2018

Contents

1 - General description of the population 3

1.1 - Overall UCITS population and full reporting scope 3

1.2 - Coverage rate by investment policy type and by global exposure calculation method 3

2 - Overall UCITS population 4

2.1 - Main characteristics 4 a) Net assets 4 b) Investment policy types 4 c) Global Exposure calculation methods 4

2. 2 - Realised leverage 5 a) Realised gross leverage by investment policy type and by global exposure calculation method (all UCITS) 5 b) Funds under the commitment approach 5 c) Funds under the VaR approach 5

3 - UCITS in the full reporting scope 6

3.1 - Main characteristics 6

3.2 - Global exposure and leverage 7 a) Funds under the Commitment approach 7 b) Funds under the VaR approach 7 c) Usage of leverage 8 d) Value-at-Risk (VaR) 8

3.3 - Stress testing and other risk indicators 9 a) Univariate stress test results 9 b) Realised volatility 10

3.4 - Efficient portfolio management (EPM) techniques 10 a) Evolution of volumes and number of active funds by EPM type 10 b) Main active Investment Fund Managers (IFMs) per EPM type 11 c) EPM volumes by investment strategy 11 d) Securities Lending: Use of Agent lenders & indemnification against borrower default 12

3.5 - Counterparty risk and collateral in relation to EPM techniques / OTC and traded derivatives 12

3.6 - Liquidity 14 a) Portfolio liquidity at semester-end in normal market conditions 14 b) Portfolio liquidity at semester-end in normal market conditions (bond funds) 15 c) Portfolio liquidity at semester-end in stressed market conditions 16 d) Portfolio liquidity at semester-end in stressed market conditions (bond funds) 17 e) Liquidity Management Tools 17

3.7 – Credit 18 a) Aggregate credit exposure by internal ratings and by credit spreads 18

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1 - General description of the population

1.1 - Overall UCITS population and full reporting scope

In the context of the UCITS Risk Reporting, all Luxembourg domiciled UCITS1 authorised by the CSSF are required to provide some general information/basic functional data including the global exposure calculation method and the realised level of leverage, as well as, for UCITS under a VaR approach, the expected level of leverage. In addition, detailed information on risks is requested for UCITS falling in the “full reporting scope", i.e. UCITS fulfilling at least one of the following two criteria:

- net assets above EUR 500 million; - use of VaR for the calculation of global exposures covered by Article 42(3) of the 2010 Law with an average

gross leverage during the semester greater than 250%2.

1.2 - Coverage rate by investment policy type3 and by global exposure calculation method

1 In this report, the terms “UCITS” and “fund” will be used both for an entity in the case of a non-umbrella UCITS and for each sub-fund in the case of an umbrella UCITS. 2 In accordance with the rules set out in the applicable regulation, the gross leverage is calculated as the notional sum of the derivatives used. 3 Fund classifications are based on the BCL investment policy types. The category “Hedge funds” includes funds that implement alternative strategies while respecting the UCITS regulatory framework (often referred to as “liquid alternative funds”).

Not in the reporting scope

25% 825 Bn€

TNA >= 500M€70%

2 354 Bn€TNA >= 500M€ and real.

levg >= 250%4%

148 Bn€

Realised lvg >= 250%1%

43 Bn€

In the reporting scope75%

2 544 Bn€

Overall UCITS Population and UCITS falling in the reporting scope (in terms of net assets)

0%

20%

40%

60%

80%

100%

0200400600800

1.0001.2001.400

Cov

erag

e (in

term

s of

ass

ets)

TNA

(Bn

€)

Coverage rate by investment policy type

All UCITS Coverage

0%

20%

40%

60%

80%

100%

0

500

1.000

1.500

2.000

2.500C

over

age

(in te

rms

of a

sset

s)

TNA

(Bn

€)

Coverage rate by global exposure calculation method

All UCITS Coverage

4 / 18

2 - Overall UCITS population

2.1 - Main characteristics

a) Net assets

b) Investment policy types

c) Global Exposure calculation methods

0%

10%

20%

30%

40%

50%

prop

ortio

n of

fund

s (bl

ue) /

% o

f tot

al n

et a

sset

s (o

rang

e)

Breakdown by net asset value

units net assets

0%

20%

40%

60%

80%

100%

% o

f tot

al n

et a

sset

s

number of funds

Market concentration

1.153,1 bn€34%

1.099,4 bn€33%

663,7 bn€20%

141,9 bn€4%

23,7 bn€1%

287,9 bn€8%

Investment policy types (in terms of net assets)

Bond funds Equity funds Mixed fundsHedge funds Other funds MMF

3.048 28%

3.995 36%

2.860 26%

594 5%

493 4%

110 1%

Investment policy types (in terms of units)


2.104 bn€62%

556 bn€17%

709 bn€21%

Global exposure calculation methods (in terms of net assets)

Commitment Absolute VaR Relative VaR

7.602 69%

1.689 15%

1.809 16%

Global exposure calculation methods (in terms of units)

Commitment Absolute VaR Relative VaR

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2. 2 - Realised leverage

a) Realised gross leverage by investment policy type and by global exposure calculation method (all UCITS)

Methodology note : for the purpose of this sub-section, the realised leverage level is - for funds under a VaR approach, the semester-average value; - for funds under the commitment approach and TNA above 500M EUR, the semester-end value; and - for funds under the commitment approach and with TNA below 500M EUR, the TNA-weighted average of the

semester-end leverage of all funds in the same category under the commitment approach and with TNA above 500M EUR.

b) Funds under the commitment approach

c) Funds under the VaR approach4

4 By convention, where several levels of leverage are disclosed in the prospectus (for example an expected and a maximum or a range with minimum and maximum), the expected gross leverage reported in this analysis is based on the highest number.

90%

15%

102%

347%

89%

2%0%

50%

100%

150%

200%

250%

300%

350%

400%

Aver

age

real

ised

leve

rage

(TN

A w

eigh

ted)

Average TNA-weighted realised gross leverage

Dec 2016 June 2017 Dec 2017 June 2018 Dec 2018

24%

74%

240%

70%

0%

50%

100%

150%

200%

250%

300%

Aver

age

real

ised

leve

rage

(TN

A w

eigh

ted)

Average TNA-weighted realised gross leverage


0%

20%

40%

60%

0% 0-25% 25-50% 50-75% 75-100% >100%

Realised leverage of commitment funds

units net assets

0%

20%

40%

60%

80%

100%

Prop

ortio

n of f

unds

Realised leverage

Realised leverage of VaR funds

units

net assets

0%

20%

40%

60%

80%

100%

Prop

ortio

n of f

unds

Expected leverage

Expected leverage of VaR funds

units

net assets

6 / 18

3 - UCITS in the full reporting scope

3.1 - Main characteristics

LongShort

Long-ShortMarket-neutral

ArbitrageUnconstrained/Multi-strategy

0

200

400

600

800

1.000

net a

sset

s (B

n€)

Net assets by principal asset class and investment strategy

1.380 bn€54%638 bn€

25%

137 bn€5%

10 bn€1%

380 bn€15%

Investment regions(in terms of net assets)

Multiple Region EuropeAsia & Pacific Central & South AmericaNorth America

1.073 60%452

25%

100 6%

9 0%

157 9%

Investment regions (in terms of units)

Multiple Region EuropeAsia & Pacific Central & South AmericaNorth America

1.456 bn€57%

760 bn€30%

328 bn€13%

Investment markets(in terms of net assets)

Developed Mixed Emerging

963 54%608

34%

220 12%

Investment markets(in terms of units)

Developed Mixed Emerging

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3.2 - Global exposure and leverage

a) Funds under the Commitment approach

b) Funds under the VaR approach

Note: As per the guidelines, “positive” interest rate and credit spread duration correspond to long exposure on bonds. It represents exposures such as fixed rate receiver of an IRS or protection seller of a CDS.

0%

5%

10%

15%

20%

25%

30%

Gross leverage per derivative category (Commitment funds)

Futures Swaps Forwards Options

0%

5%

10%

15%

20%

25%

30%

Gross leverage per risk factor (Commitment funds)

Equity IR Credit FX Other (incl TRS)

0%

50%

100%

150%

200%

Gross leverage per derivative category (VaR funds)

Futures Swaps Forwards Options

0%

50%

100%

150%

200%

Gross leverage per risk factor (VaR funds)

Equity IR Credit FX Other (incl TRS)

-25% -15% -5% 5% 15% 25%

Equity

Fixed Inc / Int rates <3M

Fixed Inc / Int rates 3-12M

Fixed Inc / Int rates 1-5Y

Fixed Inc / Int rates >5Y

Credit

Commodity

VolatilityGross leverage by risk factors (ex-FX and "other")

Dec 2018 Short / neg duration Dec 2018 Long / pos durationJun 2018 Short / neg duration Jun 2018 Long / pos duration

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c) Usage of leverage5

d) Value-at-Risk (VaR)6

Net assets and average TNA-weighted VaR by principal asset class and principal investment strategy7

5 For the purpose of this report, the usage of leverage is defined as the ratio of the realised to the regulatory limit for funds under the commitment approach, respectively the ratio of the realised to the expected level of gross leverage disclosed in the prospectus for funds under the VaR approach. 6 Value-at-risk for a confidence interval of 99% and holding period of 1 month (20 days). For the avoidance of doubt, the graph is based on the absolute VaR levels of both UCITS under an absolute and a relative VaR approach. 7 In the “heatmap” graph each fund category is represented by a rectangle whose size is proportional to its net assets and whose colour reflects its average absolute VaR.

787

83

39

27

1

839

64

22

12

0

0% 50% 100%

0 - 25%

25% - 50%

50% - 75%

75% - 100%

> 100%

% of the population

Usa

ge (%

of T

NA)

Usage of leverage (funds under the commitment approach)

Average

Maximum

184

103

132

161

136

138

250

159

197

119

95

34

0% 10% 20% 30% 40%

0 - 25%

25% - 50%

50% - 75%

75% - 100%

100% - 150%

> 150%

% of the population

Usa

ge (%

of T

NA)

Usage of leverage (funds under the VaR approach)

Average

Maximum

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3.3 - Stress testing and other risk indicators

a) Univariate stress test results8

8 As set out in the guidelines, the univariate stress test results should not take into account dependencies/correlations between risk factors. For the sake of readability, Bond funds and MMF (resp. Equity funds) are excluded from the graph illustrating the univariate stress test on equities (resp. on interest rates and on credit spreads).

0%

5%

10%

15%

20%Average VaR (TNA-weighted)


0% 10% 20% 30% 40% 50% 60%

< -35%

-35% to -25%

-25% to -15%

-15% to -5%

-5% to 0%

0%

0% to 5%

>= 5%

% of funds

Resu

lt as

% o

f net

ass

ets

Univariate Stress tests results (Equity -30%)

0% 10% 20% 30% 40% 50%

< -35%

-35% to -25%

-25% to -15%

-15% to -5%

-5% to 0%

0%

0% to 5%

>= 5%

% of funds

Resu

lt as

% o

f net

ass

ets

Univariate Stress tests results (Interest rates +200 bps)

10 / 18

b) Realised volatility

3.4 - Efficient portfolio management (EPM) techniques

a) Evolution of volumes and number of active funds by EPM type

0% 10% 20% 30% 40% 50% 60%

< -35%

-35% to -25%

-25% to -15%

-15% to -5%

-5% to 0%

0%

0% to 5%

>= 5%

% of funds

Resu

lt as

% o

f net

ass

ets

Univariate Stress tests results (Credit spreads +100%)

0%

5%

10%

15%

20%Realised volatility (TNA-weighted)


2,4

35,6

80,8

0,1

118,0

0

20

40

60

80

100

120

140

Repos ReverseRepos

SecuritiesLending

SecuritiesBorrowing

TOTAL

Volumes by EPM type (in Bn€)


31 83

574

1

622

0

100

200

300

400

500

600

700

Repos ReverseRepos

SecuritiesLending

SecuritiesBorrowing

TOTAL (atleast one

EPM type)

Number of funds engaged in EPM transactions


11 / 18

b) Main active Investment Fund Managers (IFMs) per EPM type9

c) EPM volumes by investment strategy

9 The graphs represent the IFMs with the largest aggregate UCITS exposures arising from the use of EPM transactions at semester-end.

Securities lending (total 80,8 Bn€)

IFM 1

IFM 2

IFM 3

Reverse Repos (total 35,6 Bn€)

IFM 2

IFM 1

Repos (total 2,4 Bn€)

IFM 1

IFM 2

IFM 3

47

248

33

-

10

20

30

40

50

60

Bn €

EPM volumes by investment strategy

Sec Lending Sec Borrowing Repos Reverse Repos

12 / 18

d) Securities Lending: Use of Agent lenders & indemnification against borrower default

3.5 - Counterparty risk and collateral in relation to EPM techniques / OTC and traded derivatives

Methodology note: The graph represents the biggest counterparties of UCITS in terms of (positive and negative) net counterparty exposure of UCITS in the full reporting scope. More specifically, the main counterparties are determined based on the sum of the absolute values of the net exposures of all UCITS in the full reporting scope to their three counterparties with the largest positive net exposure and their three counterparties with the largest negative net exposure at semester-end. It is determined at group rather than at legal entity level.

26% 21 bn€

44%35 bn€

30%24 bn€

74%60 bn€

Sec Lending (in volume, Bn €)

No use of agent lenders or other intermediarieswith indemnificationwithout indemnification

18%101

65% 372

17%95

82%467

Sec Lending (in units)

No use of agent lenders or other intermediarieswith indemnificationwithout indemnification

491 bn€27%

231 bn€13%

1.074 bn€60%

1.305 bn€73%

Trading and clearing of financial derivative instruments (based on gross assets)

Listed OTC - CCP cleared OTC - Bilaterally cleared

Ctpy 1

Ctpy 2

Ctpy 3

Main counterparties (ctpy) on EPM and OTC derivatives transactions

13 / 18

1009

110

43

13

14

52

617

2

0

1

1

1

0% 20% 40% 60% 80% 100%

0% - 1%

1% - 2%

2% - 3%

3% - 4%

4% - 5%

>= 5%

% of funds engaged in OTC derivatives / EPM transactions

expo

sure

in %

of n

et a

sset

sOverall net positive counterparty exposure on OTC derivatives /

EPM transactions

EPM

OTC

91%117 Bn€

7% / 9 Bn€

1% / 2 Bn€ 1% / 1 Bn€

0% / 1 Bn€

9%12 Bn€

Collateral received on EPM and OTC derivative transactions and reinvestment of cash collateral (in Bn €)

Non cash collateral Deposits Govt bonds Rev repos Short-Term MMF

14 / 18

3.6 - Liquidity

a) Portfolio liquidity at semester-end in normal market conditions10

10 The figures are based on the self-assessment of the IFMs on the time to liquidate of their funds under normal market conditions and appear relatively over-optimistic.

20%

30%

40%

50%

60%

70%

80%

90%

100%

% o

f net

ass

ets

Time to liquidate (normal market conditions)

All funds Bond funds Equity funds Mixed fundsHedge funds Other funds MMF

81% 83%88%

93%85% 88%

0%

20%

40%

60%

80%

100%

Evolution of 7-days liquidity (normal market conditions)


15 / 18

b) Portfolio liquidity at semester-end in normal market conditions (bond funds)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Asse

t Liq

uidi

ty in

% o

f net

ass

ets

Time to liquidate (normal market conditions)focus on bond funds

All funds Investment Grade Bonds General BondsEmerging Markets Bonds High Yield Bonds

84% 88%81% 81%

67%

0%

20%

40%

60%

80%

100%

Evolution of 7-days liquidity (normal market conditions)


16 / 18

c) Portfolio liquidity at semester-end in stressed market conditions11

11 As per the guidelines, this sub-section is optional and was filled in by a minority of funds (about 25% of the full reporting scope, more specifically in terms of number of funds per category: 254 Bond, 158 Equity, 68 Mixed, 40 Hedge, 3 Other and 20 MMF funds). It is critical to stress that the results are based on different methodologies and/or assumptions.

20%

30%

40%

50%

60%

70%

80%

90%

100%

Asse

t Liq

uidi

ty in

% o

f net

ass

ets

Time to liquidate (stressed market conditions)

All funds Bond funds Equity funds Mixed fundsHedge funds Other funds MMF

66%59% 64%

83%

100%

79%

0%

20%

40%

60%

80%

100%

120%

Evolution of 7-days liquidity (stressed market conditions)


17 / 18

d) Portfolio liquidity at semester-end in stressed market conditions (bond funds)

e) Liquidity Management Tools

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Asse

t Liq

uidi

ty in

% o

f net

ass

ets

Time to liquidate (stressed market conditions)focus on bond funds

All funds Investment Grade Bonds General BondsEmerging Markets Bonds High Yield Bonds

68%74% 73%

60%

40%

0%

20%

40%

60%

80%

100%

Evolution of 7-days liquidity (stressed market conditions)


89%

62%

19%

98%

1%0%

20%

40%

60%

80%

100%

Available liquidity management tools (TNA-weighted)


0%

33%

2%0%0%

20%

40%

60%

80%

100%

Usage of liquidity management tools (at least once)


18 / 18

3.7 – Credit

a) Aggregate credit exposure by internal ratings12 and by credit spreads13

12 As per the guidelines, exposures to debt securities should be broken down by credit rating from 1 to 10 with reference to an internal assessment of the credit quality of the said instruments, whereby rating 1 is deemed to be the upper credit rating (i.e. the highest quality) and 10 relates to defaulted securities. 13 According to the guidelines, this sub-section is only applicable, with a few exceptions (e.g. funds of funds), to UCITS within the full reporting scope which have a total debt portfolio exposure (direct or indirect) at semester-end greater than or equal to 50% of the UCITS total net assets.

-

200

400

600

800

1.000

1.200

0%

20%

40%

60%

80%

100%

120%

Num

ber o

f fun

ds

% o

f net

ass

ets

Aggregate credit exposures by internal ratings

rating = 1 rating = 2 rating = 3 rating = 4 rating = 5 rating = 6

rating = 7 rating = 8 rating = 9 rating = 10 sample size

-

200

400

600

800

1.000

1.200

0%

20%

40%

60%

80%

100%

120%

Num

ber o

f fun

ds

% o

f net

ass

ets

Aggregate credit exposures by credit spreads

cr spread < 100 bps cr spread > 100 and < 350 bps cr spread > 350 and < 1000 bps

cr spread > 1000 bps sample size

Documents

UCITS Risk Reporting€¦ · 1.1 - Overall UCITS population and full reporting scope. 3. 1.2 - Coverage rate by investment policy type and by global exposure calculation method. 3