Pension funds fear hedging clampdown in Austria
Austria’s version of the Ucits IV rules has a strict definition of hedging, meaning funds either have to cut their use of derivatives or risk breaching leverage limits. Pension funds could be next in line. Cécile Sourbes reports
What is a hedge? Regulators grappled with this nebulous question back in 2009, while drafting the fourth Undertakings for Collective Investment in Transferable Securities Directive (Ucits IV) – Europe's attempt to create uniform standards for funds. They eventually decided a hedge has to lead to a "verifiable reduction of risk at the Ucits level" and be of the same asset class.
The definition is important, as the amount of derivatives exposure a Ucits fund can have is limited, and a hedge can
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