European alternative investment funds (AIF) are heavily dependent on reverse repo to fund their business activities, exposing the industry to liquidity transformation and rollover risk, a report by the European Securities and Markets Authority (Esma) shows.
Almost 60% of total borrowings among these funds are through reverse repo, while a further 18% is funding secured by other means. Only 10% of funding is made up of unsecured borrowings.
Hedge funds, a subset of AIF, rely strongly on short-
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