EDHEC-Risk Institute has today recommended a number of key proposals to limit non-financial risks in the European fund management industry which emerged during 2007-8 undermining the quality of the UCITS label.
In its new publication Proposals for Better Management of Non-Financial Risks within the European Fund Management Industry, the institute stated that current regulation such as AIFMD, UCITS V, MiFID II, IMDII, PRIPS and EMIR will not solve the problem.
Therefore it said that there must be a reinforcement on non-financial risks – particularly with “a requirement for the Key Investor Information Document (KIID) to contain a description of gross risk exposure and how to manage these risks, as well as a synthetic indicator of the fund’s net risks”.
In addition, a proposal to increase the responsibility of all actors within the fund management industry has been put forward. EDHEC-Risk Institute outlined that “it will lead to the creation of incentives to better manage non-financial risks by associating the level of required regulatory capital with the level of residual non-financial risk taken by the major players in the value chain".
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