The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published an updated list of categories of data for the global collection of hedge fund information which it believes will assist in assessing possible systemic risks arising from the sector.
The data categories were first published in February 2010 with the first IOSCO hedge fund survey in September 2011.
The Task Force on Unregulated Financial Entities (Task Force) has agreed to conduct a second hedge fund survey in September 2012, with responses expected by the end of the year. In support of this the Task Force has reviewed the categories of data used for the first survey and, based on lessons learned and recent legislative developments in the US and Europe, has amended the list of data it will collect for the second survey.
IOSCO believes that regular monitoring of hedge funds by securities regulators for systemic risk indicators/measures, such as size, interconnectedness and substitutability, will provide a vitally important time series of data that will help to monitor trends in hedge funds and therefore provide an invaluable insight into any potential systemic risks that hedge funds may pose to the global financial system.
Data Reporting Categories
The survey enables the collection of internationally consistent data which can be shared to facilitate international supervisory cooperation. The revised list below reflects the minimum that the Task Force will collect for the next IOSCO hedge fund survey. This is not a comprehensive list and regulators are not restricted from requesting additional information at a domestic level, based on their legislative and/or regulatory requirements.
There are 10 proposed categories of information which incorporate both supervisory and systemic data and build on the data collection recommendations set out in its final report on Hedge Fund Oversight.
1. General firm/advisor and fund information
General firm/advisor information (e.g. firm name, firm reference number, authorities for which the firm is registered/authorised, number of qualifying hedge funds, firm assets under management (i.e. firm AUM, firm HF AUM)).
Fund information (e.g. fund name, inception date, domicile, net asset und information (e.g. fund name, inception date, domicile, net asset value of total fund assets, net asset value of total strategy assets, predominant investment strategy).
Some of the aforementioned categories will not necessarily be provided to IOSCO in the reporting of aggregate exposures but are important for running a survey (e.g. firm and fund names).
2. Performance and investor information for each qualifying fund
Recent performance details:
Periodic performance of fund assets (e.g. for each month) over the survey reporting period.
Percentage of net asset value of fund assets below high water mark.
Net asset value of fund assets by investor types (e.g. Financial institutions, high net worth individuals, fund of funds, etc).
3. Market and Product Exposure for strategy assets
For each qualifying fund, details of the material positions in various asset classes split by:
- Securities: Value of Long and short positions in categories such as cash and cash equivalents, listed equities, unlisted equities, corporate bonds, sovereign bonds, convertible bonds, loans, structured/securitised products;
- Derivatives: Long and short CDS positions and the gross value of foreign exchange, interest rate derivatives, commodity derivatives and other derivatives;
- Physical (Real/ Tangible) Assets: Value of long positions in categories such as physical real estate, art and collectables, etc;
- Collective Investment Undertakings: Value of long positions in categories such as money market funds;
- Value of investments in other hedge funds and parallel managed accounts; and
- Investments in other asset classes: Value of long and short positions.
For some of the aforementioned products, e.g. listed equities, there may be a request for a geographic split of assets.
4. Geographical focus
For each qualifying fund, details of the regional investment focus.
5. Turnover/ number of transactions
For each qualifying fund, value of turnover in each asset class over the reporting period.
6. Trading and clearing
Estimated percentage of :
- Securities traded (in terms of market value) - OTC vs. exchange traded;
- Derivatives traded (in terms of trade volumes) - OTC vs. exchange traded;
- Derivative transactions cleared (in terms of trade volumes) - by a CCP vs. bilaterally; and
- Repo trades cleared (in terms of market value) - by a CCP vs. bilaterally vs. tri-party.
Information on primary CCPs.
7. Leverage and risk
Value of borrowings by source i.e. unsecured borrowing, collateralised borrowing (via prime brokerage and/or repo), synthetic borrowing (e.g. CFD, TRS).
Amount of unencumbered cash
Various risk measures used by hedge fund managers (e.g. net DV01, net CS01 and net Equity Delta, which measure a portfolio's sensitivity to movements in interest rates, credit spreads and equity prices).
8. Liquidity risk
Details of portfolio, investor and financing liquidity
Ability to gate or suspend funds and any restrictions currently in place.
Fund assets subject to special arrangements arising from their illiquid nature.
9. Counterparty risk
Primary counterparties in terms of net counterparty credit exposure.
Extent of rehypothecation of collateral and other credit support by counterparties.
10. Other information
Concentration (e.g. principal markets in which trading can represent a significant proportion of overall daily volume, top ten positions as a % of gross market value).
Portfolio complexity (e.g. number of open positions).
The original list was developed by the Task Force on Unregulated Entities (Task Force) following requests from the Financial Stability Board (FSB) as well as from IOSCO members.