ESMA: EU AIF industry is highly concentrated around few large participants
04 April 2018 Paris
Image: Shutterstock
The EU alternative investment fund (AIF) industry is highly concentrated around a few large participants and asset classes, according to the European Securities and Markets Authority (ESMA).
ESMA, which released its latest trends, risks and vulnerabilities (TRV) report on 4 April, also found that the vast majority of European AIFs are managed cross-border using passporting rights.
The Alternative Investment Fund Directive (AIFMD) data showed that 2 percent of the EU AIF funds are above €1 billion in size, holding around 46 percent of the industry’s total net asset value (NAV).
ESMA reported that around 95 percent of EU AIFs hold below €500 million (40 percent of total NAV).
Two-thirds of the total assets managed by EU AIFMs are divided among fixed income funds, equity funds, infrastructure funds, commodity funds and other funds.
ESMA reported that fixed income AIFs hold the largest share in terms of NAV. The AIFMD data also found that repurchase agreements serve as AIFs’ primary borrowing source, while unsecured borrowing plays only a minor part.
In addition, EU hedge funds mainly rely on short-term funding liquidity, with the majority of their borrowings, not committed beyond one day.
The extensive reporting obligations introduced by the AIFMD for AIFs and their managers (AIFMs) allow national competent authorities to oversee whether AIFMs are properly addressing micro-prudential risks, and to assess the potential systemic consequences of the individual or collective AIFM activities.
ESMA stated that by providing a first analysis of the structure and main risks stemming from the AIF market, the authority’s article helps to build an operational framework for monitoring risks in the AIFM sector.
The ESMA TRV provides EU-wide evidence on the AIF market, based on end-2016 data collected under AIFMD.
AIFs include hedge funds, real estate funds, funds-of-funds, and private equity funds.
ESMA, which released its latest trends, risks and vulnerabilities (TRV) report on 4 April, also found that the vast majority of European AIFs are managed cross-border using passporting rights.
The Alternative Investment Fund Directive (AIFMD) data showed that 2 percent of the EU AIF funds are above €1 billion in size, holding around 46 percent of the industry’s total net asset value (NAV).
ESMA reported that around 95 percent of EU AIFs hold below €500 million (40 percent of total NAV).
Two-thirds of the total assets managed by EU AIFMs are divided among fixed income funds, equity funds, infrastructure funds, commodity funds and other funds.
ESMA reported that fixed income AIFs hold the largest share in terms of NAV. The AIFMD data also found that repurchase agreements serve as AIFs’ primary borrowing source, while unsecured borrowing plays only a minor part.
In addition, EU hedge funds mainly rely on short-term funding liquidity, with the majority of their borrowings, not committed beyond one day.
The extensive reporting obligations introduced by the AIFMD for AIFs and their managers (AIFMs) allow national competent authorities to oversee whether AIFMs are properly addressing micro-prudential risks, and to assess the potential systemic consequences of the individual or collective AIFM activities.
ESMA stated that by providing a first analysis of the structure and main risks stemming from the AIF market, the authority’s article helps to build an operational framework for monitoring risks in the AIFM sector.
The ESMA TRV provides EU-wide evidence on the AIF market, based on end-2016 data collected under AIFMD.
AIFs include hedge funds, real estate funds, funds-of-funds, and private equity funds.
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