Majority of EU funds’ CDSs are ‘naked’ exposures

Of more than 4,000 CDS positions assessed by Esma researchers, 71% were uncovered

More than two-thirds of European funds’ single-name credit default swap (CDS) positions do not cover bonds held in their portfolios. The amount of these so-called ‘naked’ exposures suggests funds use CDSs mainly for speculative purposes, rather than to hedge corporate and sovereign debt books.

New research published by the European Securities and Markets Authority (Esma) showed that out of more than 4,000 single-name CDSs held by a sample of 381 fixed income and alternative funds, 71% were

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