Calculation Of Leverage By UCITS: CSSF Press Release

As announced in their annual report 2011 and following the release by ESMA of its Q&A relating to the Risk Measurement and Calculation of Global Exposure and Counterparty Risk for UCITS ("2012/ESMA/429"), the CSSF published yesterday a press release on its website. In this press release, the CSSF provides clarification in terms of the determination of leverage and its disclosure in the prospectus and the annual report for the UCITS determining the global exposure as per Article 42(3) of the Law of 17 December 2010 on undertakings for collective investment through a value-at-risk (VaR) approach. The CSSF clearly states that the sum of the notionals approach is now the standard reference. An English translation of the press release is available on our website.

1. Determination of the level of leverage

   Newly created UCITS (or compartments thereof) must determine their level of leverage on the basis of the sum of the notionals approach from the moment they are launched. Existing UCITS must determine the level of leverage based on the sum of the notionals approach as quickly as possible and at the latest from 1 January 2013 onwards. However, the CSSF recognises the possibility for UCITS to carry out the calculation of the leverage level by using the commitment approach in addition to the sum of the notionals approach.

2. Disclosure in the prospectus

   For newly created UCITS (or compartments thereof) the expected level of leverage should be based on the sum of the notionals approach. Existing UCITS must update their prospectus at the latest by 31 December 2012. Similarly, the CSSF leaves the door open for UCITS to complement the expected level of leverage calculated through the sum of the notionals approach (i) by a figure determined by...