The European Fund Management Industry Needs a Better Grasp of Non-financial Risks

UCITS, the European retail regulated investment funds, were created shortly after the 1985 passage of the first UCITS directive. Since then, non-financial risks have increased, but European authorities and investment professionals failed to study the impact of these risks when they allowed UCITS funds to evolve.

Author(s):

Noel Amenc

Professor of Finance, Director of Development at EDHEC Business School, Head of EDHEC-Risk Institute.

Samuel Sender

Applied Research Manager at EDHEC-Risk Institute

The increase of non-financial risks in investment funds is the result above all of the growing sophistication of the transactions and financial instruments of investment funds, of the pursuit of non-traditional risk premia, as well as of such regulatory actions as the passage of the eligible assets directive (EAD) and the improved possibilities for leverage in sophisticated UCITS. In addition, inappropriate regulatory certification contributed to the sale of bad products, to misrepresentation of these products, and to increasing risk. Country competition in the implementation of EU regulations and possibly in supervisory practices also had an impact.

Type: EDHEC Publication
Date: le 04/01/2011
Research Cluster : Finance

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