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). Two-thirds of the total assets managed by EU AIFMs are divided among the following investment strategies:

• Fixed income fund;
• Equity fund;
• Infrastructure fund;
• Commodity fund; and
• Other fund.

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.

The extensive reporting obligations introduced by the AIFMD for AIFs and their managers (AIFMs) allow National Competent Authorities to oversee whether AIFMs are properly addressing micro-prudential risks, and to assess the potential systemic consequences of the individual or collective AIFM activities. 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.

Background

The objective of the AIFMD is to provide an internal market and a harmonised regulatory and supervisory framework for the activities within the EU of all AIFMs.

ESMA’s TRV contributes to promoting financial stability and enhancing consumer protection by regularly looking into cross-border and cross-sector trends, risks and vulnerabilities, both at the wholesale and retail level.

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). Two-thirds of the total assets managed by EU AIFMs are divided among the following investment strategies:

• Fixed income fund;
• Equity fund;
• Infrastructure fund;
• Commodity fund; and
• Other fund.

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.

The extensive reporting obligations introduced by the AIFMD for AIFs and their managers (AIFMs) allow National Competent Authorities to oversee whether AIFMs are properly addressing micro-prudential risks, and to assess the potential systemic consequences of the individual or collective AIFM activities. 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.

Background

The objective of the AIFMD is to provide an internal market and a harmonised regulatory and supervisory framework for the activities within the EU of all AIFMs.

ESMA’s TRV contributes to promoting financial stability and enhancing consumer protection by regularly looking into cross-border and cross-sector trends, risks and vulnerabilities, both at the wholesale and retail level.

eu-LISA held its fourth annual meeting with the Heads of Diplomatic Missions in Estonia today. The meeting took place in the eu-LISA headquarters in Tallinn.

The aim of the meeting was to exchange views on the challenges that Europe faces today with internal security and border management, and eu-LISA’s response to said challenges.

This event has become a good annual tradition for the Ambassadors and eu-LISA to meet and discuss the current topics on the European agenda with relevance to the Agency.

Future similar events include a meeting with the JHA Councellors and the MEPs that form the LIBE Committee respectively on the 10th and 24th later this month.

eu-LISA held its fourth annual meeting with the Heads of Diplomatic Missions in Estonia today. The meeting took place in the eu-LISA headquarters in Tallinn.

The aim of the meeting was to exchange views on the challenges that Europe faces today with internal security and border management, and eu-LISA’s response to said challenges.

This event has become a good annual tradition for the Ambassadors and eu-LISA to meet and discuss the current topics on the European agenda with relevance to the Agency.

Future similar events include a meeting with the JHA Councellors and the MEPs that form the LIBE Committee respectively on the 10th and 24th later this month.

The TA covers the areas of format and content of prospectus, the EU growth prospectus and the scrutiny and approval of prospectus.

Steven Maijoor, Chair, said:

“The Prospectus Regulation, supporting the Capital Markets Union (CMU), aims to make it easier and cheaper for companies, and in particular smaller companies, to access capital and improve their prospectuses accessibility for investors.  ESMA proposes a large number of simplifications and adaptations of the prospectus regime, aimed at maintaining a strong level of investor protection while also opening up new possibilities for companies to diversify their financing.”

Format and content of prospectus

The advice takes as a starting point the existing prospectus regime, largely proposing to maintain what has proved to be a set of requirements that works well.  ESMA sets out a number of changes aimed at easing requirements for issuers, with a view to reducing the cost and administrative burden in using a prospectus, as well as a number of additional disclosure requirements that are deemed necessary for investor protection.

In addition, ESMA has developed the content of the new Universal Registration Document (URD), a new registration document for issuers of securities that are listed on a regulated market or an MTF. This URD is intended to function as a useful shelf registration document, allowing issuers to quickly offer securities to the market.  

In terms of secondary issuance, the technical advice proposes alleviated disclosure requirements by better taking into account already publicly available information.

Format and content of the EU Growth prospectus

The technical advice identifies the minimum disclosure requirements for the EU Growth prospectus, the order in which they should be presented, and the format and content of the specific summary. In order to ensure a proportionate regime for SMEs, ESMA has adapted the disclosure requirements to the issuer’s size and the complexity of its operations and balanced them against the needs of investor protection.

Scrutiny and approval of the prospectus:

The final set of technical advice sets out criteria for scrutiny and procedures for approval and filing of the prospectus. ESMA proposes that standard criteria for scrutiny of the completeness, comprehensibility and consistency of the prospectus should be adopted, and that, beyond these standard criteria, NCAs should be afforded a certain level of flexibility, which in ESMA’s view is necessary to ensure investor protection.

As regards approval and filing, ESMA proposes procedures that are largely based on the existing provisions of Commission Delegated Regulation 2016/301 with a number of amendments to reflect changes in the Level 1 text.

Next steps

The EC sought technical advice on possible delegated acts to supplement certain elements of the new Prospectus Regulation. Subject to endorsement by the EC, the technical advice will form the basis for the delegated acts to be adopted by the EC by 21 January 2019.