risk ‐‐‐‐based supervision of ucits – critical analysis of...

Supervision of UCITS

Risk‐‐‐‐based supervision of UCITS – Critical Analysis of a New Approach

Maxim Giller, B.A.

Sandweg 13, 9495 Triesen

+49 163 18 02 766

[email protected]

FS 110276

Nathanel Chaouat, B.Sc.

Sandweg 13, 9495 Triesen

+33 613 37 81 03

[email protected]

FS 100470

Seminar paper

In partial fulfillment of the requirements for the degree of Master of Science

University of Liechtenstein

Graduate School

Faculty: Banking and Financial Management

Module: International Corporate Finance

Course: Seminar in Finance

First Supervisor: Prof. Dr. Marco Menichetti

Second Supervisor: Lars Kaiser

Edit Period: 12 March 2012 – 20 June 2012

Submission Date: 21 June 2012


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Table of contents

Abstract ................................................................................................................................................... 3

1 Introduction ..................................................................................................................................... 4

2 Investment fund risks and risk management approaches ................................................................ 5

2.1 Risks ........................................................................................................................................ 5

2.2 Risk management approaches ................................................................................................. 6

2.2.1 Synthetic Risk and Reward Indicator .............................................................................. 7

2.2.2 Global exposure ............................................................................................................... 9

2.2.2.1 Commitment approach ................................................................................................ 9

2.2.2.2 Value at Risk (VaR) approach ................................................................................... 10

Absolute VaR approach ............................................................................................................. 11

Relative VaR approach .............................................................................................................. 11

2.2.3 Counterparty risk ........................................................................................................... 13

3 Implementation of the risk management approaches into the law of Liechtenstein ...................... 13

4 Implications for the fund industry ................................................................................................. 15

5 Conclusion ..................................................................................................................................... 17

Reference list ......................................................................................................................................... 19

Annex .................................................................................................................................................... 21

Example 1 – Commitment approach ................................................................................................. 21

Example 2 – Absolute VaR approach ............................................................................................... 22

Example 3 – Relative VaR approach ................................................................................................ 23

VaR approach requirements .............................................................................................................. 24

Non-exhaustive list of standard derivatives ...................................................................................... 25

Non-exhaustive list of financial instruments which embed derivatives ............................................ 27

Interview 1 ......................................................................................................................................... 28

Interview 2 ......................................................................................................................................... 28

Interview 3 ......................................................................................................................................... 29

Affidavit ................................................................................................................................................ 30


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Abstract

Being investment funds, UCITS are exposed to market risk, credit risk, liquidity risk and operational

risk. Hence, the UCITS Directive’s objective is to protect the investors. By Implication, risk-based

supervision means: The more complex a UCITS’ structure and strategy, the more advanced the corre-

sponding risk management has to be. If a UCITS fund uses derivatives for hedging, the simpler com-

mitment approach is allowed to be applied. If a UCITS fund uses derivatives as return generators, the

Value at Risk approach has to be applied. This approach is subdivided into 2 categories: The relative

and the absolute Value at Risk approach. Depending on the strategy, the relative approach is applied if

a UCITS tries to outperform a benchmark while the absolute approach is applied if a UCITS aims at

providing a return of e.g. 10% p.a. to the investors. In order to assist investors with decision making,

the Synthetic Risk and Reward Indicator (SRRI) presents a UCITS’ risk profile at a look. A SRRI

value of 1 over 7 involves lower risk accompanied with a lower return. A value of 7 over 7 involves

higher risk going with a higher return. In summer 2011 the UCITS Directive has been implemented

into Liechtenstein’s national law. The new UCITS Law and UCITS Ordinance replaced the UCITS

chapters of the Investment Undertakings Act and Ordinance of 2005 enhancing Liechtenstein UCITS

regime’s efficiency, flexibility and accessibility to foreign funds.


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1 Introduction

The UCITS Directive (undertakings for collective investments in transferable securities) was first

adopted in 1985 in order to create a single European market for investment funds. The aim is to offer

greater investment opportunities and protection to investors, as well as greater business opportunities

to the asset management industry as a whole.1 One of the principal innovations was permitting distri-

bution to investors in any other EU member state (later also EEA member states), provided certain

conditions were met.2 Being the cornerstone in the development of the European investment funds

industry, UCITS have evolved into a successful global brand building up a worldwide reputation as a

well supervised retail financial product.3 The current UCITS IV Directive is another step towards a

truly cross-border market. Essentially it is a toolbox of efficiency and consolidation measures.4

UCITS are investment funds and therefore not risk-free. Indeed, they need to be well supervised in

order to guarantee appropriate investor protection. As a consequence, the organization of the UCITS

market becomes more stringent with respect to the UCITS IV Directive. For instance, management

companies wishing to obtain an authorization to market their products under the UCITS label need to

separate hierarchically and organizationally 4 functions: Complaint management, compliance/internal

revision, risk management and management to avoid conflicts of interest.5

This seminar paper seeks to provide a deep insight into the risk-based supervision of UCITS. It starts

by introducing the legal authorities’ intention to regulate the risk, investment funds are faced to. Then

it presents the different risk management approaches developed by CESR (Committee of European

Securities Regulators, now: ESMA – European Securities and Market Authorities). Moreover, it inves-

tigates its implementation into the law of Liechtenstein. An additional emphasis is put on a critical

analysis with regards to the application of such a framework in the context of the fund market regula-

tion.

1 KPMG, RBC Dexia Investor Services (2009), p. 7 – 8. 2 Ernst & Young (2009), p. 2. 3 KPMG, RBC Dexia Investor Services (2009), p. 7 – 8. 4 KPMG, RBC Dexia Investor Services (2009), p. 7. 5 von Osten (2012), interview (see annex).


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2 Investment fund risks and risk management approaches

36,175 UCITS funds reached a level of EUR 5,633,825.- million in total net assets at the end of De-

cember 2011.6 This corresponds roughly to 71% of the European investment fund industry. With re-

gard to Liechtenstein: 476 of 728 funds belong to the UCITS market. At the end of 2011 the Liechten-

stein UCITS market’s net assets amounted EUR 25,467.- million (almost 85% of the overall Liechten-

stein fund industry amounting EUR 29,979.- million).7

Nevertheless, this market is not risk-free. These investment funds, irrespective of their number, are

confronted with different types of risk and the investors who trust the UCITS label need to be protect-

ed. This leads to 2 key questions: Which risks are these investment funds faced to? And how are these

risks regulated by the financial authorities?

2.1 Risks

The UCITS Directive’s objective is mainly to protect investors from risks to which UCITS funds are

exposed regarding their performances and strategies they adopt. The recent market turbulences

showed clearly an obvious need for comprehensive approaches and high standards for risk manage-

ment in order to contribute to that previous goal.8 In other words: To keep the objective of protection,

the risk management process has to follow some requirements set up by the UCITS Directive. In order

to provide a better understanding of risk management, it is necessary to introduce the different risks

related to UCITS funds.

UCITS funds are exposed to 4 types of risks: Market risk, credit risk, liquidity risk and operational

risk. From an investor’s viewpoint, these risks can be materialized into capital losses or poor invest-

ment performance.9 Among the financial risks, market risk represents the risk of fluctuations in the

market value of the securities invested by the funds, which may be caused by different market condi-

tions.10 Credit and liquidity risk, are risks related to events which may harm the trading conditions of

certain securities (illiquidity) or the credit rating of specific issuers (worst case: default).11 Operational

risk refers to losses triggered by external events, weak internal systems or failure due to the complexi-

ty of some instruments, strategies or processes. This can be summarized by this table:

6 Efama (2012), p. 10. Data for Russia are not included. 7 Own estimations based on Efama (2012), p. 10. In the sense of publicly offered open-end investment funds (transferable securities and money market instruments), including funds-of-funds assets. 8 CESR/09-178 (2009), p. 3. 9 CESR/09-178 (2009), p. 8. 10 CESR/09-178 (2009), p. 8. 11 CESR/09-178 (2009), p. 9.


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Figure 1: Investment Fund Risks.

Source: Own creation based on Bodie, Kane, Marcus (2011), p. 197, p. 309; Hull (2012a), p. 37.

The identification of the risk exposure is the first part of all processes of risk management. However,

the risk management approaches are various and their results are different. In order to keep UCITS

funds under control, risk management approaches have to be settled clearly and their uses defined

precisely. So, what are the risk management approaches and guidelines developed by the European

Commission in the UCITS Directive?

2.2 Risk management approaches

Following the reasoning previously mentioned, it is now to evoke the risk management approaches

developed by the CESR, UCITS funds have to respect. Resulting from the UCITS Directive

(85/611/EEC), the European Commission announced in March 2007 a series of targeted enhancements

to the UCITS Directive. After several revisions, the final text of the Directive (2009/65/EC) was

adopted and published in the Official Journal in 2009. In the same year, the European Commission

submitted a request to CESR for technical advice regarding the implementation of risk measurement

and risk management methodologies concerning global exposure and counterparty risks. Hence, the

CESR provided them different guidelines, now used in the UCITS regulation.12

Their role is mainly to help the European Committee to dismantle national differences in fund regula-

tions of member states. In forming common enforcement practices and simplifying notification proce-

dures, the aim is to offer more transparency and protect investors against the risks UCITS funds are

faced to.

12 CESR/09-178 (2009), p. 5.


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It consists in 3 levels of measures:

• The level I set of measures regulates the UCITS structure: Assets are segregated in order to

decrease the risk exposure and roles are clearly split to avoid any kind of conflicts of interests.

• On the level II, the investment rules of UCITS are settled: A list of investable assets is de-

fined, given with that some diversification recommendations, restrictions on borrowing or

shorting and the prohibition of direct investments in commodities or real estate. The purpose

is to help the investors to recognize the funds that best fit in with their needs. With this UCITS

IV label, investors already know what kind of investments the funds are doing and whether

they correspond to their expectations. Small investors or a less risky one would like to avoid

some type of investments like real estate or commodities. Thus, this label allows a better

recognition of these funds and attracts more investor in.13

• The level III set of measures is related to the UCITS passports across the European Union.

This framework integrates measurement and methodology for 3 key points: The Synthetic Risk and

Reward Indicator, the global exposure and the counterparty risk.14

2.2.1 Synthetic Risk and Reward Indicator

As far as concerned the Synthetic Risk and Reward Indicator (SRRI) which is included in the KIID

(Key Investor Information Documents), CESR proposed the use of a synthetic indicator for funds’

risks and reward disclosure.15 This indicator is based on the volatility of the fund and is applied to all

UCITS, enabling investor to compare funds and assess their level of risk thanks to this indicator based

on a numerical scale.

This methodology covers the particular features of the different funds and completes these criteria and

objectives:16

• Relevant risk and reward indicator of UCITS available to investors.

• Provide a SRRI scale which allocates various risk ranks.

• Impossibility of manipulation of the SRRI indicator.

• Application of the SRRI by UCITS providers has to be simple and cost-saving.

• Supervision and understanding by all involved parties has to be simple and effective.

• Maintenance of a stable SRRI with respect to market variability and movements.

13 Casey (2006), p.1 – 3. 14 CESR/10-788 (2010), p. 3. 15 CESR/10-673 (2010), p. 3. 16 CESR/10-673 (2010), p. 3.


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The general methodology consists of calculating the volatility of the fund and basically ranking it over

a scale from 1 to 7 (1 being low risk/lower reward and 7 high risk/higher reward).17 The volatility is

estimated using the weekly past returns of the fund or monthly ones. To be consistent, it is necessary

to consider the returns of the past 5 years, taking into account relevant earnings or dividend payoffs.

The computation follows the standard method:

�� = � mT − 1 ×�� ,� − ��²

�

��

Source: CESR/10-673 (2010), p. 5.

Moreover, the arithmetic mean of a UCITS’ return is calculated as follows:

� = 1T ×� �,�

�

��

Source: CESR/10-673 (2010), p. 5.

The result of the volatility computation is then compared to the table below in order to indicate a

fund’s risk class.

Table 1: A UCITS fund’s risk class implied from volatility intervals.

Risk Class

Volatility Intervals

equal or above less than

1 0% 0,5%

2 0,5% 2%

3 2% 5%

4 5% 10%

5 10% 15%

6 15% 25%

7 25%

Source: CESR/10-673 (2010), p. 7.

The SRRI and KIID have to be revised by the management company in case that the investment strat-

egy or policy gets changed.18 Nevertheless, it is important to notice that different fund types require

17 CESR/10-673 (2010), p. 7. 18 CESR/10-673 (2010), p. 8.


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different volatility calculation. The CESR guideline 10-673 informs about the volatility estimation

methods to use depending on the fund type (Absolute return funds, Total return funds, Life cycle

funds, Structured funds).19 In order to keep the structure of this paper clear, examples can be found in

the annex.

The Synthetic Risk and Reward Indicator was one of the most important and useful tools delivered by

the CESR to the European Commission. Nevertheless, the CESR worked also on the regulation con-

cerning the calculation of the global exposure and the counterparty risk.20

2.2.2 Global exposure

The global exposure is, in fact, a measure that determines how many units in the portfolio are at risk

by using derivatives. By such definition, it includes all types of risk described previously: Market risk,

operational risk, credit risk and liquidity risk.21 For an investor, it is important to know the level of

global exposure in order to understand the level of risk the fund is facing. In the context of the UCITS

Directive, the CESR proposed to the European Commission 2 different approaches concerning the

global exposure calculation that UCITS funds have to compute and report on a daily basis:22

• the Commitment approach

• the Value at Risk approach

2.2.2.1 Commitment approach

Regarding the commitment approach, it is the easiest to calculate following 3 steps:

• compute the commitment value of each derivative and units of the portfolio;

• sum up these values;

• divide the sum by the total of the net asset value of the UCITS;

It can be presented as follows:

∑ |Commitment�|�� UCITS_NAV ≤ 100%

Source: CSSF (2007), p. 6 – 7.

Where ∑ |Commitment�|�� is the total value of all derivative positions in the portfolio and

UCITS_NAV, the net asset value of the UCITS. The commitment is the notional value of the derivative

position i.

19 von Osten (2012), interview (see annex). CESR/10-673 (2010), p. 9 – 14. 20 CESR/10-788 (2010), p. 1. 21 CESR/10-788 (2010), p. 3. 22 CESR/10-788 (2010), p. 5.


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Each derivative has its own commitment value corresponding to its position. This explains the fact that

the calculation is not the same for all derivatives. A list with the derivative type and its commitment

value calculation is given in the annex. Following this method, the rule is that the commitment amount

of all portfolio positions should not exceed the net asset value of the UCITS. There exist some other

rules but this one is relatively the most important since it gives a clear understanding of the global

exposure a fund is facing to.

For UCITS funds that use derivatives for hedging, the risk is covered by this position and doesn’t

come from it. Hence, the commitment approach that is simpler, based on the delta analysis of a deriva-

tive, is acceptable.23 However, for UCITS funds that use derivatives as return generators, this approach

is not enough adapted to the behavior of the derivatives in term of risk. More precisely, the commit-

ment approach is more a linear relationship between the derivative and its relative position on the un-

derlying, which doesn’t capture the total risk of the derivatives. In case of hedging, this approach is

still appropriate because the combination of opposite positions in the portfolio covers the risks linked

to these instruments. This is not the case in return generation strategies. Hence, the risk based on those

strategies can be better analyzed by a mathematical approach that is more related to the derivatives

complexity: The VaR approach.24

2.2.2.2 Value at Risk (VaR) approach

This method is a more advanced and complex one, adapted to the strategies of “sophisticated” funds.

In particular, a fund is considered being a UCITS “sophisticated” funds when it uses principally FDI

(Financial Derivative Instruments) or complex strategies as a return generation goal.25 Concerning this

method, there exist 2 variants: A relative VaR approach and an absolute VaR approach.

The fund may choose between these methods. However, it will need to demonstrate that the VaR ap-

proach it uses is the most appropriate.26 This demonstration will have to be fully documented in order

to prove that this choice is the right one. Concerning the Value at Risk (VaR), it measures the maxi-

mum loss of a portfolio given a certain level of confidence and normal market conditions, if holding

the assets for a defined period of time.27

23 Hanke (2012), interview (see annex). 24 Fidessa (2011), p. 1 – 2. 25 Deloitte (2009), p. 1. 26

Hanke (2012), interview (see annex). 27 Hull (2012b), p. 471.


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This can be calculated through 3 different methods differing by their assumptions:

• Variance-Covariance Model: This method assumes a normal distribution of returns. It is ac-

cepted only under the existence of a linear relationship between the portfolio value and the

underlying positions.28

• Historical Simulation Model: It assumes that future asset returns will follow the historical dis-

tribution of the portfolio.29

• Monte Carlo Simulation: It assumes that asset returns follow a random walk.30

The difference of use consists again of the UCITS’ risk profile and its investment strategy. If a UCITS

fund uses derivatives to generate an absolute return (for example an annual return of 10%) without

basing its strategies on a reference index or benchmark to outperform, the absolute VaR is the best

method to use. Otherwise, if its strategy is based on trying to outperform a referential in the market,

the relative VaR is more suitable.31

Absolute VaR approach

Funds which follow an absolute return strategy (x% return p.a.) are required to use the absolute VaR

approach.32 In such an approach, the fund may not have a VaR greater than 20% of the UCITS’ Net

Asset Value. This is computed under the assumption of a holding period of 1 month, an observation

period of 1 year and a level of confidence of 99%.33

However, for funds that possess referential portfolio and try to outperform it, this method is not the

most adequate. They have to use the Relative VaR approach that coincides better with their strategy.

Relative VaR approach

To conduct this method, a UCITS fund needs to find a portfolio that can be defined as a reference

portfolio. This portfolio has to be unlevered and not be composed of any derivatives. The risk profile

of the both portfolios, the UCITS and the reference portfolio, need to be consistently similar. The ref-

erence portfolio’s risk profile should be in line with the investment objectives, policies and limits of

the UCITS portfolio.34 The idea of this approach is basically to compare 2 portfolios that are, in the

assumptions, supposed to be equal. By implication, the VaR of the portfolio of the UCITS fund should

not be too large compared to the VaR of its relative reference portfolio. As far as concerned the refer-

28 Hull (2012b), p. 481 – 482. 29 Hull (2012b), p. 474 – 478. 30 Hull (2012b), p. 488 – 489. 31 Hanke (2012), interview (see annex). 32 CESR/10-788 (2010), p. 23. 33 CESR/10-788 (2010), p. 26. 34 CESR/10-788 (2010), p. 7.


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ence portfolio, it may be an index, a combination of indices or a synthetic benchmark portfolio that

can be comparable to the risk profile of the UCITS fund analyzed.35

Nevertheless, 2 exceptions exist:36

- UCITS engaging in a long/short strategy should use a reference portfolio which uses deriva-

tive instruments to gain the short exposure

- UCITS which intend to have a currency hedged portfolio should choose a portfolio currency

hedged index

This can be described by the following formula:

(,-./01�2 − ,-.34�4546749:5��:;<:),-.34�4546749:5��:;<: × 100 ≤ 100%

Source: CESR/10-788 (2010), p. 24.

It consists of 3 steps:37

• Calculating the VaR of the UCITS portfolio;

• Defining and calculating the VaR of the reference portfolio;

• And finally, compare them;

The constraint is that the VaR of the UCITS portfolio is not twice bigger than the VaR of the reference

portfolio. In other words, the global exposure, compared to the referential, is still acceptable. This

method allows preventing UCITS from using highly leveraged strategies with regards to unleveraged

portfolio. The leverage should not bring more than maximum twice the risk of an unleveraged portfo-

lio from the same risk profile.

Some other qualitative requirements concerning these approaches other than the measurement of a

maximum VaR have to be fulfilled such as stress testing and back testing. These are explained in the

annex.

The global exposure and its management are not the only points needed to be developed in terms of

risk measurement. This includes only risks related to the instruments and strategies as described be-

fore. However, another risk needs to be taken into account to keep the UCITS funds under control and

protect investors: The counterparty risk.

35 Szylar (2010), p. 160. 36 CESR/10-788 (2010), p. 24. 37 CESR/10-788 (2010), p. 24 – 25.


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2.2.3 Counterparty risk

The risk to each party of a contract that the counterparty will not live up to its contractual obligations,

so called counterparty risk, is also taken under consideration by the CESR guidelines.38 The UCITS

Directive defined regulation concerning that risk in order to limit the exposure to single counterparties

and that in the whole the loss is reduced thanks to diversification.39

Hence, the article 52(1) of the UCITS Directive limits counterparty risks in restricted the volume of

investments per counterparty.40 Put another way, the limit for an investment with a single counterparty

is fixed to a maximum of 5% of its assets. The limit may be elevated to 10% provided that the total

amount of transferable securities and money market instruments invested more than 5%, lies below

40%.41

As far as concerned the mathematical approach used to calculate it, the commitment one must be used

when appropriate. Otherwise, the maximum potential loss as result of default by the issuer can also be

considered for a more conservative point of view. One of these approaches must be used regardless of

the use of the VaR for the global exposure calculation.42 Apart from the limits, collaterals may be used

to reduce the counterparty risk.43 This collateral has to comply with some set of high level principles at

all time: Liquidity, valuation correlation and only be invested in risk-free rate.44 In order to keep this

paper simple, details can be found on literature related to CESR measures, in annexes.

Nonetheless, it is not sufficient only to provide risk management approaches to market participants.

The next step is its integration into the different national laws. Hence, this paper describes how the

risk management approaches were implemented into the law of Liechtenstein.

3 Implementation of the risk management approaches into the law of Liechtenstein

In its meeting from 28 June 2011, the Liechtenstein Parliament adopted the new fund law (namely:

UCITS Law), which entered into force on 1 August 2011. The UCITS Law implements the UCITS

Directive in the Liechtenstein financial center. Further, this law is accompanied by the UCITS Ordi-

nance which ensures the correct implementation of the UCITS Law.45 Thus, the UCITS chapters of the

Investment Undertakings Act and Ordinance of 2005 have been replaced.

38 Bodie, Kane, Marcus (2011), p. 785. 39 CESR/10-788 (2010), p. 37. 40 CESR/10-788 (2010), p. 38. 41 CESR/10-788 (2010), p. 39. 42 CESR/10-788 (2010), p. 39. 43 Szylar (2010), p. 191 – 196. 44 CESR/10-788 (2010), p. 37. 45 Schraner, Voigt, Tribelhorn (2011), http://www.presseportal.ch.


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The adopted UCITS Law goes beyond the minimal requirements set forth by the European Directive

2009/65/EC.46 Significantly, it introduces reforms aimed at making Liechtenstein’s UCITS regime

more efficient and easily accessible to foreign funds. These include short time-to-market, flexible fund

structures, simple seat transfers and tax transparency.47

Similarly to the Investment Undertakings Act of 2005, the Liechtenstein’s UCITS Law implements an

authorization procedure that is shorter than what is mandated by the European Directive. As soon as

an investor completes his fund authorization application, the Liechtenstein’ Financial Market Authori-

ty (FMA) sends him a notice within 3 business days after receiving the application. Then, the investor

waits 10 business days for the FMA to review the fund’s authorization. Indeed, the 2011 UCITS Law

automatically grants the authorization if the applicant receives no communication from the FMA with-

in these 10 business days. In case that the FMA has reservations regarding the application, the review

period may be extended to 2 months. Hence, fund promoters are able to adapt faster to changing mar-

ket conditions and meet customer demand.48

In order to facilitate the understanding how the risk management approaches are implemented into the

law of Liechtenstein, several articles from the UCITS Law and the UCITS Ordinance are transformed

into the table below.

Table 2: Selected articles from the Liechtenstein UCITS Law and UCITS Ordinance.

Article Main Content

Liechtenstein UCITS Law

23

• A management company has to apply appropriate risk management methods which ensure the monitoring and measuring the risk associated with the investment positions as well as the share of the overall risk profile.

• The used procedures have to enable an accurate and independent assessment of the value of OTC-derivatives.

• The risk management systems have to be reviewed and adjusted at appropriate in-tervals, at least annually.

51

• A UCITS is allowed to make investments in securities, money market instruments, max. 10% in other UCITS, on demand deposits and short term deposits, deriva-tives, cash/liquidity.

• A UCITS is not allowed to invest more than 10% in other assets than in the assets mentioned before.

• A UCITS is not allowed to acquire precious metals or certificates representing precious metals.

53

• A management company has to inform regularly the FMA about the species of the derivatives in the portfolio, the associated risks and the corresponding measurement techniques, the investment limits.

• A UCITS has to ensure that the overall risk associated with derivatives does not

46 Hooghiemstra, Litwin (2011), p. 1. 47 Hooghiemstra, Litwin (2011), p. 1. 48 Hooghiemstra, Litwin (2011), p. 1 – 2.


15

exceed the total net value of its portfolio.

• When calculating this risk, the market value of the underlying assets, the counterparty risk, future market movements and the time available to liquidate the positions have to be taken into account.

Liechtenstein UCITS Ordinance

41

• The risk management principles cover the methods which are necessary to evalu-ate the risks relevant to UCITS (namely: market risk, liquidity risk, counterparty risk, operational risk, other risks).

• The management company has to allocate internally the responsibilities in terms of risk management.

42

• The management company has to evaluate, monitor and review regularly: � Compliance, adequacy and effectiveness of risk management principles, pro-

cesses, procedures. � Adequacy and effectiveness of actions to remedy any weaknesses in the per-

formance of risk management processes.

• The management company has to inform the FMA about any essential changes to the risk management processes.

43

• The management company has to set up adequate and effective arrangements, pro-cesses and procedures in order to: � Measure and manage at any time the risks to which the managed UCITS are

exposed/are likely to be exposed to. � Ensure the compliance with the limits for total risk and counterparty risk.

• Risk measurement and management have to be based on solid and reliable data. The documentation has to be done adequately.

• As appropriate: Back testing and stress testing to verify the validity of risk assess-ment measures.

44

• The management company has to compute the total UCITS-risk at least once a day.

• According to expediency, the management company may compute the total risk applying the commitment approach, the Value-at-Risk Model or using an estab-lished Advanced Measurement Approach.

• The chosen approach has to be in accordance with the UCITS’ investment strategy and its complexity.

Source: Own exposition based on the Liechtenstein UCITS Law (Gesetz vom 28. Juni 2011 – UCITSG) and

UCITS Ordinance (Verordnung vom 5. Juli 2011 – UCITSV).

This adaption of the law gets the reorganization process of the Liechtenstein’s fund industry under

way. Indeed, what are the specific implications for the fund industry?

4 Implications for the fund industry

As a member state of the EEA, Liechtenstein’s UCITS Law is fully harmonized with the UCITS IV

Directive. Thus, Liechtenstein enjoys a comparative market access advantage. A customs union with

Switzerland provides for VAT exempt cross-border activities. On the other hand, membership in the

EEA grants Liechtenstein’s UCITS funds the new UCITS IV European passport. Additionally, the

Swiss Franc, Liechtenstein’s official currency, acts as a guarantee of financial stability.49

49 Hooghiemstra, Litwin (2011), p. 2.


16

These factors combined allow fund promoters and management companies to easily access the juris-

diction and profit from its new flexible and efficient UCITS regulatory regime.50 However, this ex-

porting expansion of Liechtenstein’s management companies will keep within reasonable limits. The

same applies to the entrance of foreign management companies. Generally speaking: Liechtenstein

will remain a niche market.51

In December 2011, Ahead Wealth Solutions AG became the first Liechtenstein investment fund man-

agement company to receive authorization from the FMA under the new UCITS Law.52 It takes a lot

of effort for a management company to implement such organizational changes into their internal pro-

cesses. Although there is no deadline set, it is expected that all Liechtenstein management companies,

which want to receive authorization under the new UCITS Law, will finish reorganize themselves by

the end of 2012.53

Since retail investors are the major target group, the directed risk management approaches serve to

protect them. There is no intention to restrict the management companies in achieving returns because

they may apply appropriate strategies without breaking the regulating rules.54 Hence, the guidelines

provided by CESR are worked out in cooperation with different financial authorities and management

companies. Several respondents expressed their general agreement with the definition and scope of

global exposure while giving feedback. One of them noted the importance of creating a uniform un-

derstanding and fostering a level playing field. Another respondent felt it may also be appropriate to

consider whether the UCITS should disclose any internal risk management measures and limits as part

of the investment process.55

The main comment made on the definition and scope of global exposure concerns the requirement to

calculate the global exposure on at least a daily basis. In fact, many stakeholders disagreed with this

requirement deeming the intra-day calculation very costly. Some of them proposed that an intra-day

assessment (not calculation) should be carried out only if necessary, given specific market circum-

stances. Another stakeholder supported the concept of ongoing monitoring rather than daily calcula-

tion.56 Despite this, the Committee expressed that not monitoring the global exposure on a daily basis

would not be reasonable for UCITS because this element of risk measurement is of a great importance.

Therefore, CESR did not amend the Guidelines for this issue.57

50 Hooghiemstra, Litwin (2011), p. 2. 51 Wagner (2012), interview (see annex). 52 Mayer (2011), p. 1. 53 Wagner (2012), interview (see annex). 54 Wagner (2012), interview (see annex). 55 CESR/10-798 (2010), p. 4. 56 CESR/10-798 (2010), p. 4. 57 CESR/10-798 (2010), p. 4.


17

The SRRI allows investors to assess the risk applicable to a potential investment in a UCITS and helps

to compare the relative risks associated with different funds. In essence, the simplicity of the SRRI’s

numeric scale facilitates an investor’s decision making in contrast to a complex set of calculations.

This important property excuses the fact that the SRRI does not capture all the risks UCITS are faced

to.58 Nevertheless, the computing process behind the SRRI did not arrive at its destination yet. Despite

the SRRI cannot be an absolutely ideal risk measure there is still some potential for improvements.

E.g. it may include also liquidity risk in the future (beside the volatility at the actual state of affairs).59

Concerning the additional administrative workload which is supposed to occur because of the imple-

mentation of risk management approaches (e.g. daily calculation of the global exposure, SRRI etc.) the

Liechtenstein FMA removes ambiguity. Firstly, the computed measures may change sharply from day

to day (despite it is unlikely) which makes a calculation on a daily basis indispensable. Secondly, all

measures are computed by machines, so there is not that much additional administrative workload

which may bind human resources. Thirdly, the management companies will make it a routine to calcu-

late the risk measures the course of time.60 Of course there will be a disproportion with regard to econ-

omies of scale which depend on the size of a management company. While a large management com-

pany may administrate many UCITS using its IT-platform, a small management company will respec-

tively manage a small number of UCITS.61

5 Conclusion

The UCITS label confirms a fund being under the respect of an EEA-wide standard. This conformity

attracts more investors. However, it is challenging to regulate such a big market with so many differ-

ent participants. Each of them tries to attempt a different kind of goal applying different strategies.

According to this research, the UCITS Directive on the topic of the risk-based supervision has im-

proved consequently. Nowadays, measurements and methodologies are settled with respect to the

complexity of a UCITS fund. An indicator was introduced in order to assist an investor in decision

making and limits were implemented to control the risks. With regards to these enhancements and the

development of the UCITS regulation through the past, UCITS’ risk management improved continu-

ously.

Arguments on the SRRI regarding its lack to implement all risks, or its difficulty of daily maintenance

are not essential. As long as the majority of administrative work is done by computers, the correspond-

ing effort should not be overestimated to provide such a measure to investors. Put apart this argument,

it is important to remind the purpose of the UCITS Directive and framework creations. The common

58 Hanke (2012), interview (see annex). 59 Wagner (2012), interview (see annex). 60 Wagner (2012), interview (see annex). 61 Wagner (2012), interview (see annex).


18

investor has to be able to choose between funds to invest with respect to his preferences regarding

investments, risk-return profile etc. Since there are differences in investors’ professionalism, an easy

understandable measure has to be settled. Indeed, the SRRI is sufficient according to this develop-

ment. Moreover, the KIID gives to the investor (even a more professional one) a clear and transparent

overview on a fund’s activities and its real risks in different measures.

The regulation also improved with regards to different levels of complexity of a fund. Developing

appropriate risk measurement methods does justice to this. The commitment approach is suitable for

funds applying basic strategies and VaR approaches fit in with funds pursuing more complex strate-

gies. As regards Liechtenstein, the UCITS Directive has been implemented into the national law which

goes beyond the minimal requirements. As a result, Liechtenstein’s UCITS regime is efficient, flexible

and easily accessible to foreign funds.

To conclude, the UCITS Directive allows now funds to find adequate risk methodologies and

measures according to their strategies. In all ambiguous questions like the use of the absolute or rela-

tive VaR approach, a committee is in place to judge efficiency and adequacy of the choice to make.


19

Reference list

Bodie, Z., Kane, A. & Marcus, A. J. (Hrsg.). (2011). Investments (9. Aufl.). New York: McGraw-

Hill/Irwin.

Casey, J.-P. (Hrsg.). (2006). Eligible assets, investment strategies and investor protection in light of

modern portfolio theory: Towards a risk-based approach for UCITS. Brussels (ECMI Policy Brief No.

2/September 2006).

CESR (Hrsg.). (2009). Risk management principles for UCITS: Ref.: CESR/09-178. Paris

CESR (Hrsg.). (2010). CESR’s Guidelines on Risk Measurement and the Calculation of Global Expo-

sure and Counterparty Risk for UCITS: Ref.: CESR/10-788. Paris

CESR (Hrsg.). (2010). CESR’s guidelines on the methodology for the calculation of the synthetic risk

and reward indicator in the Key Investor Information Document: Ref.: CESR/10-673. Paris

CESR (Hrsg.). (2010). Feedback Statement. CESR’s Guidelines on Risk Measurement and the Calcu-

lation of Global Exposure and Counterparty Risk for UCITS: Ref.: CESR/10-798. Paris

CSSF (Hrsg.). (2007). CSSF Circular 07/308: Non-official English translation from the French origi-

nal. Luxembourg

Deloitte (Hrsg.). (2009). Sophisticated UCITS funds: A regulated alternative. Dublin

Efama (Hrsg.). (2012). International Statistical Release: Worldwide Investment Fund Assets and

Flows. Trends in the Fourth Quarter 2011. Brussels

Ernst & Young (Hrsg.). (2010). UCITS IV: Transforming the European investment fund industry.

Luxembourg (December 2009 update).

Fidessa (Hrsg.). (2011). Will ESMA prompt a step to VaR? London

Hooghiemstra, S. & Litwin, D. (Hrsg.). (2011). The Liechtenstein 2011 UCITS Law Opens New Op-

portunities for Collective Investment Vehicles. Vaduz

Hull, J. (Hrsg.). (2012a). Risk management and financial institutions + website (3. Aufl.). Hoboken,

N.J: Wiley.

Hull, J. (Hrsg.). (2012b). Options, futures, and other derivatives (8. Aufl.). Boston: Prentice Hall.

KPMG & RBC Dexia Investor Services (Hrsg.). (2009). UCITS IV: Which business model for tomor-

row? Luxembourg

Mayer, W. (Hrsg.). (2011). Media release: Ahead becomes first Liechtenstein company authorised

under new UCITS law. Vaduz


20

Principality of Liechtenstein (Hrsg.). (2011). Liechtensteinisches Landesgesetzblatt. Jahrgang 2011,

Nr. 295 ausgegeben am 1. August 2011: Gesetz vom 28. Juni 2011 über bestimmte Organismen für

gemeinsame Anlagen in Wertpapieren (UCITSG). Vaduz

Principality of Liechtenstein (Hrsg.). (2011). Liechtensteinisches Landesgesetzblatt. Jahrgang 2011,

Nr. 312 ausgegeben am 1. August 2011: Verordnung vom 5. Juli 2011 über bestimmte Organismen für

gemeinsame Anlagen in Wertpapieren (UCITSV). Vaduz

Schraner, J. J., Voigt, M. & Tribelhorn, S. (Hrsg.). (2011). Neues Fondsgesetz stärkt Finanzplatz

Liechtenstein. Vaduz

Sica, S. A. & Werle, M. (Hrsg.). (2011). Risk Based Supervision of Investment Funds. Vaduz

Szylar, C. (Hrsg.). (2010). Risk management under UCITS III/IV: New challenges for the fund indus-

try. London, Hoboken, NJ: ISTE; Wiley.


21

Annex

Example 1 – Commitment approach

A non-sophisticated UCITS with NAV $1 million is holding 2 risky positions. The first position con-

sists of 160 contracts of an ETF on the FTSE 100 each currently priced at 5,884.5. The futures posi-

tion consist of 20 contracts of FTSE 100 MAR 2011 futures with a contract size of 15 and an index

level of 5,885.2 points.62

The commitment of each individual position is:

Futures: −20 × 15 × 5,885.2 = −1,765,560

ETF: 160 × 5,885.2 = 941,632

Without netting or hedging the Global Exposure would equal the absolute value of each commit-

ment:63

1,765,560 + 941,632 = 2,707,192.

As the NAV is $1 million, the limit rule is violated:

2,707,1921,000,000 = 270.7%

Since both positions have the same underlying asset they can be netted using the netting rules defined

by CESR64. The total exposure is therefore 1,765,560 − 941,632 = 823,928. This does not stand in

violation of the limit:

823,9281,000,000 = 83.4%

The maximum could be 100%.

62 Sica, Werle (2011), p. 22. 63 Sica, Werle (2011), p. 22. 64 CESR/10-788 (2010), p. 13 – 14.


22

Example 2 – Absolute VaR approach

The Variance/Covariance model is used.

The sophisticated UCITS ABC Equity Fund consists of the following assets as shown in table 3. Vari-

ance and mean are calculated using 1 business year of daily continuous returns. The figure of interest

is the daily VaR at a confidence level of 99%, the observation period is 1 business year. Table 3 de-

picts the details of the example as well as the result.65

Table 3: Example calculation for absolute VaR.

Microsoft

Corporation

Citrix

Systems

Total

1 # shares 3,562.- 1,448.-

2 Price per 27 December 2010 28.07 69.08

3 Market Value 99,985.- 100,028.- 200,013.-

4 Weight 49.99% 50.01% 100.00%

5 Variance 0.02% 0.06% 0.03%

6 Daily � 1.39% 2.38% 1.62%

7 Daily � in $ 1,390.71 2,379.63 3,244.51

8 VaR in $ 3,240.36 5,544.55 7,559.72

9 VaR in % of NAV 3.24% 5.54% 3.78%

Source: Sica, Werle (2011), p. 23.

The first step is to gather the time series data of the past business year for Microsoft Corporation and

Citrix Systems in order to calculate the variance of the assets and their correlation. The correlation

between these 2 assets over this period is 0.4427. Furthermore the market value and weights of the

assets and of the portfolio need to be calculated. The variance of the portfolio is derived using the

formula:66

σIJKLMJN�JO = �w�Oσ�O +wOOσOO + 2w�wOσ�σOρ�,O

The daily standard deviation of the assets and the portfolio are the square root of the variance. The

standard deviation in monetary terms is calculated

σ/n$� = MarketValue� × σ� 65 Sica, Werle (2011), p. 23. 66 Szylar, 2010, p. 71 – 76, in: Sica, Werle (2011), p. 23.


23

Finally the VaR for the invested assets as well as the portfolio is calculated

VaR� = Threshold × σ/n$� Assuming a normal distribution of the returns, the 99% quintile of the standard-normal distribution is

at 2.33 standard deviations from the mean, which here is assumed to be 0. The threshold is therefore

2.33.67

Due to the correlation of 0.4427 a risk reduction through diversification effect can be observed. The

VaR of the portfolio ($7,559.80) is lower than the VaR of both risky assets ($3,240.36 + $5,544.55 =

$8,784.91). If there was perfect correlation among the assets (ρ = 1) then the VaR would be

$8,784.91.68

In summary there is a 1% chance to lose more than $7,559.80 (or 3.78% of the net asset value) in a

day for the fund, under normal market conditions. If the VaR limit is defined at its maximum of 20%,

the fund is not in violation of the limit. However, if based on the risk profile and objective of the fund,

the limit was lowered to 3%, the fund would be violating the limit and corresponding actions would

need to be taken.69

Example 3 – Relative VaR approach

Compared to the absolute VaR example, the relative VaR approach is using the VaR of a reference

portfolio such as an index a fund refers to in order to outperform it.

Let’s pretend the fund can provide an index which has the same risk profile and which is unleveraged

and not composed by any derivatives or other instruments. After calculation, the VaR of this index is

equal to $3,500.

Table 4: Example calculation for relative VaR.

]^_`abcd $7,559.80

]^__efegehiejkglfkmnk $3,500.00

Following the calculation of the relative VaR method:

(VaRop�qr − VaRstMtKtuvtIJKLMJN�J)VaRstMtKtuvtIJKLMJN�J × 100 ≤ 100%

67 Sica, Werle (2011), p. 24. 68 Sica, Werle (2011), p. 24. 69 Sica, Werle (2011), p. 24.


24

We obtain:

(7,559.80 − 3,500)3,500 × 100 = 115.99% > 100%

Hence it doesn’t respect the limit of maximum twice bigger, and will have to review its strategies and

risk management.

VaR approach requirements

The requirements regarding these methods are not only to respect a maximum limit regarding the re-

sult of the computation but also some other quantitative and qualitative requirement. After computa-

tion of this VaR, the UCITS funds will have to show that it completes different other requirements

referring to its global exposure to the risks. To develop only on the qualitative requirements, the

UCITS fund will have to run two important tests: back testing and stress testing.

The first one consists on a retroactive test. It is based on a comparison of the end of the day value of

the portfolio with its value at the end of the subsequent day. In other words, this test is used in order to

check if the risk policy and the risk management adopted would be efficient and would have make

sense on the past activities. This assumes that the past strategy will be the one that will be used on the

future activities.70

Under 99% of confidence, the accurate number of overshooting as a reference of adequate VaR model

should be 2,5 for the most recent 250 business days. An ‘overshooting’ is a one-day change in the

portfolio’s value that exceeds the related one-day value-at-risk measure calculated.71 A higher number

would point out an under estimation of the VaR model. Consequently, a UCITS fund that would en-

counter such situation should review its VaR model with appropriate adjustments. This test should be

ideally carried out on a monthly basis at least. The stress testing under the UCITS regulation should be

designed to evaluate all potential loss of value of UCITS fund assuming unexpected changes in the

relevant market parameters and correlation factors.

In other words, it tests how resistant the UCITS fund is with regards to its risk management and risks

that are not fully captured by the VaR methods under unexpected changes. The stress test should con-

sidered also those risks that are not significant in normal circumstances but can be in stress situations

such as unusual correlation changes, illiquidity of the markets in stressed time or behavior of complex

structured products under stressed conditions.72 It allows appreciating whether or not the risk man-

agement processes and policy are strong enough to struggle in difficult time. This is one of the main

70 Hull (2012b), p. 490. 71 CESR/10-788 (2010), p. 29 – 30. 72 CESR/10-788 (2010), p. 30 – 31.


25

measures adopted following the recent crisis where some funds, due to their risk exposure and lack of

measures, were not prepared.73

Non-exhaustive list of standard derivatives

Futures74

- Bond Future:

#contracts × notionalcontractsize × marketpriceofthecheapesttodeliverreferencebond

- Interest Rate Future:

#contracts × notionalcontractsize

- Currency Future:

#contracts × notionalcontractsize

- Equity Future:

#contracts × notionalcontractsize × marketpriceofunderlyingequityshare

- Index Futures:

#contracts × notionalcontractsize × indexlevel

Plain Vanilla Options (bought/sold puts and calls)75

- Plain Vanilla Bond Option:

Notionalcontractvalue × marketvalueofunderlyingreferencebond × delta

- Plain Vanilla Equity Option:

Numberofcontracts × notionalcontractsize × marketvalueofunderlyingequityshare × delta

- Plain Vanilla Interest Rate Option:

Notionalcontractvalue × delta

73 Hull (2012b), p. 490. 74 CESR/10-788 (2010), p. 8. 75 CESR/10-788 (2010), p. 8.


26

- Plain Vanilla Currency Option:

Notionalcontractvalueofcurrencyleg(s)× delta

- Plain Vanilla Index Options:

Numberofcontracts × notionalcontractsize × indexlevel × delta

- Plain Vanilla Options on Futures:

Numberofcontracts × notionalcontractsize × marketvalueofunderlyingasset × delta

- Plain Vanilla Swaptions:

Referenceswapcommitmentconversionamount(seebelow) × delta

- Warrants and Rights:

Numberofshares/bonds × marketvalueofunderlyingreferencedinstrument × delta

Swaps76

- Plain Vanilla Fixed/Floating Rate Interest Rate and Inflation Swaps

Market value of underlying (the notional value of the fixed leg may also be applied)

- Currency Swap:

Notional value of currency leg(s)

- Cross currency Interest Rate Swaps:


- Basic Total Return Swap:

Underlying market value of reference asset(s)

- Non-Basic Total Return Swap:

Cumulative underlying market value of both legs of the TRS

- Single Name Credit Default Swap:

Protection Seller: Max(market value of the underlying reference asset, notional value CDS)

Protection Buyer: Market value of the underlying reference asset

76 CESR/10-788 (2010), p. 8 – 9.


27

- Contract for Differences:

Numberofshares/bonds × marketvalueofunderlyingreferencedinstrument

Forwards77

- FX forward:


- Forward Rate Agreement:

Notional value

Leveraged exposure to indices or indices with embedded leverage

A derivative providing leveraged exposure to an underlying index, or indices that embed leveraged

exposure to their portfolio, must apply the standard applicable commitment approach to the assets in

question.

Non-exhaustive list of financial instruments which embed derivatives78

- Convertible Bonds:

#referencedshares × marketvalueunderlyingreferenceshares × delta

- Credit Linked Notes:

Marketvalueofunderlyingreferenceasset(s)

- Partly Paid Securities:

#shares/bonds × marketvalueunderlyingreferencedinstruments

- Warrants and Rights:

#shares/bonds × marketvalueunderlyingreferencedinstruments × delta

77 CESR/10-788 (2010), p. 9. 78 CESR/10-788 (2010), p. 9.


28

Interview 1

� Date: 16. May 2012

� Time: 9:00 – 9:45

� Place: University of Liechtenstein, Mühleweg 5, 9490 Vaduz, Liechtenstein

� Participants: Prof. Dr. Michael Hanke (University of Liechtenstein), Maxim Giller, Nathanel

Chaouat

� Language: English

• No choice regarding Commitment vs. VaR� derivatives are used as investment for generat-

ing returns � complex rules; for hedging � simple rules

• Benchmark: Relative VaR � demonstrate sufficiency + high level of correlation to bench-

mark

• Absolute return strategy: Absolute VaR

• Cascade of investment vehicles � layer � investor knows what the fund is doing without

looking at its strategy

• Amount of risk + type of risk: not allowed to invest in everything + limits

• UCITS market access � risk not higher than 100% sophistication (typical retail investor or

institutional investor)

• Many strategies can be applied without breaking the regulation rules

• It will never be a guarantee to have a certain risk measure � does not capture all types of risk

• SRRI helps to make a decision � typical user, typical situation

• Back testing: Indicator that the system works at a roughly sufficient level.

Interview 2

� Date: 16. May 2012

� Time: 15:00 – 15:30

� Place: Finanzmarktaufsicht Liechtenstein, Landstrasse 109, Postfach 279, 9490 Vaduz, Liech-

tenstein

� Participants: Markus Wagner (FMA – Securities Division – Head of the Supervision Section),

Claude Weber (FMA – Securities Division – Supervision Section), Maxim Giller

� Language: German

• Retail auch long/short Strategien � keine Einbußen hinsichtlich des potenziellen Ertrags

• Keine festen Fristbestimmungen: Ende 2012 werden voraussichtlich alle Investmentgesell-

schaften auf UCITS Law + Ordinance umgestellt haben

• Dienstleistungen können nun grenzüberschreitend vertrieben werden (zuvor nur Produkte)


29

• Luxemburg und Irland führend hinsichtlich UCITS

• Liechtenstein wird ein Nischenmarkt bleiben. FL will und kann sich mit anderen Ländern

nicht vergleichen.

• Deutschland ist ein großer Retailmarkt

• SRRI � es besteht Verbesserungsbedarf (z.B. Liq.). Dieser Indikator ist ein guter

Benchmarkvergleich.

• Es können von einem Tag zum Anderen große Schwankungen auftreten. Eine tägliche Be-

rechnung ist daher notwendig, zumal alles über IT läuft � bindet weniger HR

• Mit der Zeit wird alles zur Routine.

• Die Expansion wir sich in Grenzen halten (FL ins Ausland und Ausland ins FL)

• Economies of scale abhängig von der Größe der Investmentgesellschaft � Je größer Gesell-

schaft, desto größer Economies (viele UCITS über eine IT Plattform)

Interview 3

� Date: 01. June 2012

� Time: 16:00 – 17:00

� Place: LAFV Liechtensteinischer Anlagefondsverband, Fürst-Franz-Josef-Strasse 13, PF

1507, 9490 Vaduz

� Participants: Annette von Osten (Chief Executive), Maxim Giller

� Language: German

• 3 Effizienz-Maßnahmen im grenzüberschreitenden Verkehr: 1. Management Company Pass-

port; 2. Cross Boarder Mergers; 3. Cross Boarder Master Feeder

• Für die Fondsindustrie gemacht

• Anforderungen an Verwaltungsgesellschaften: 4 Funktionen hierarchisch und organisatorisch

trennen: 1. Beschwerdemanagement; 2. Compliance/interne Revision; 3. Risikomanagement;

4. Management zur Vermeidung von Interessenskonflikten

• Es entstanden/entstehen Verfahrenshandbücher

• nun viel stringenter

• Kommt der Effizienz zu Gute.

• Entscheidungsträger beaufsichtigen und unter Kontrolle stellen

• Dort, wo die Entscheidungsträger reguliert und beaufsichtigt werden, muss entsprechende

Substanz sein (Büros, Personal, Systeme)

• SRRI wird nicht pauschal berechnet, sondern in Abhängigkeit von dem Fondstyp (Absolute

return funds, Total return funds, Life cycle funds, Structured funds)


30

Affidavit

I hereby declare under penalty of perjury that the present paper has been prepared independently by

myself and without unpermitted aid. Anything that has been taken verbatim or paraphrased from other

writings has been identified as such. This paper has hitherto been neither submitted to an examining

body in the same or similar form, nor published.

Vaduz, 20 June 2012

Maxim Giller Nathanel Chaouat