AIFM: Update of ESMA Q&A

On 29 March 2019, two new Q&As were added to the ESMA Q&A on the application of the AIFMD in Section VII:  Calculation of leverage.

One relates to the frequency of the calculation of the leverage by an AIFM. According to ESMA, an AIFM should calculate the leverage of each AIF that it manages as often as necessary to ensure that the AIF is capable of remaining in compliance with leverage limits at all times. Consequently, leverage should be calculated at least as often as the NAV is calculated, or more frequently if required.

ESMA also gives a few examples of circumstances which may lead to increased frequency of leverage calculation, i.e. material market movements, changes to portfolio composition and any other factors the AIFM believes require calculation of leverage more frequently than NAV calculation in order for the AIF to remain in compliance with leverage limits at all times.

The other question relates to the need to adjust the calculation of leverage exposure of an AIF resulting from a short-term interest rate future. In its answer, ESMA states that the calculation of leverage exposure of an AIF resulting from a short-term interest rate future should not be adjusted for the duration of the future.