The Board of the International Organization of Securities Commissions (IOSCO) today published its Investment Funds Statistics Report, which provides new insights into the global investment funds industry and the potential systemic risks this industry may pose to the international financial system.
Since 2010, IOSCO has undertaken a biennial data collection exercise in the form of the IOSCO Hedge Funds Survey. However, the scope of this latest report goes beyond hedge funds to include, for the first time, an analysis of the opened-ended and closed-ended funds industries. It is based on a comprehensive collection of supervisory data from IOSCO members.
Going forward, the report will be an annual exercise that aims to facilitate the regular collection and analysis of investment fund data, enabling regulators to share information and observe trends regarding trading activities, leverage, liquidity management, markets and funding in the global investment funds sector.
The current report is the first edition. Like most monitoring efforts based on data, trends matter, and the purpose of data collection is to monitor these trends over time. However, even in this early stage, the report is able to glean the following messages from the data:
- In aggregate, open-ended funds are not meaningfully leveraged by any metric; while
- in normal times, the portfolio liquidity is managed in line with the liquidity offered to investors.
- In contrast, hedge funds exhibit strong liquidity management procedures, with portfolio liquidity far in excess of the liquidity offered to investors;
- Hedge funds aggregate leverage, while increasing, is still below leverage levels seen in most banks.
- For closed-ended funds, liquidity management concerns are not the same as for other funds types, while leverage levels are not meaningful;
- However, current leverage metrics inadequately capture the leverage employed by Private Equity (PE) funds. PE are heavy users of leveraged finance and are more likely to place that leverage on the balance sheet of an investment target rather than on the fund´s own balance sheet.