ESMA_QA_1194

Status: ✅ Answer Published

Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/1194

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Regulatory Context

Regulation : UCITS

Level 1 Regulation: Undertakings for Collective Investment in Transferable Securities Directive (UCITS) Directive 2009/65/EC

Level 2 Regulation: No information available

Level 3 Regulation: No information available

Topic: UCITS global exposure

Subject Matter: Risk Measurement and Calculation of Global Exposure and Counterparty Risk for UCITS - Hedging strategies

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Question

Submission Date: 01 July 2012

Can the following strategy be qualified as a hedging strategy as defined in CESR’s guidelines? A portfolio management practice which only aims to reduce the interest rate risk of a corporate bond portfolio by entering into a short position on bond future contracts (or an interest rate swap) in the same currency and with a similar interest rate duration. Note that in this case the portfolio credit risk would remain un-hedged.

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ESMA Answer

Answer Date: 01-07-2012

[ESMA 34-43-392 UCITS Q&A, section 5, Q&A 1a] Yes. This strategy could be considered as a hedging arrangement as defined in CESR’s guidelines as it is in line with the example set out in paragraph 33(a) of the guidelines.

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This document was automatically extracted from the ESMA EMIR Q&A database.