ESMA eyes EU-wide leverage limits for alts funds

Looks to harmonise approach across EU

Pan-European regulator ESMA is consulting on proposals which could see alternatives funds, like hedge funds and private equity, slapped with EU-wide leverage limits.

In a consultation paper published on Friday in response to the European Systemic Risk Board's April 2018 recommendations to address liquidity and leverage risk in investment funds, ESMA looked to set out "essential" proposals to put in place a harmonised approach to regulating and monitoring Alternative Investment Fund (AIF) leverage across the EU. Hedge funds up short positions against Woodford Patient Capital AIFs can employ both financial leverage and derivatives-linked synthetic leverage, which cannot be observed from balance sheets, as derivatives are accounted for at market valu...