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ESMA’s latest Trends, Risks, Vulnerabilities (TRV) Report No. 1, 2018, also found that the vast majority of European AIFs are managed cross-border using passporting rights.
The ESMA TRV provides first-time EU-wide evidence on the AIF market, based on end-2016 data collected under the Alternative Investment Fund Directive (AIFMD). AIFs include hedge funds, real estate funds, funds-of-funds, and private equity funds.
The AIFMD data shows that 2% of the EU AIF funds are above EUR 1bn in size, holding around 46% of the industry’s total net asset value (NAV). On the other hand, around 95% of EU AIFs hold below EUR 500mio (i.e. 40% of total NAV).
Fixed income AIFs hold the largest share in terms of NAV. The AIFMD data also shows 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.
By providing a first analysis of the structure and main risks stemming from the AIF market, the ESMA article helps to build an operational framework for monitoring risks in the AIFM sector.