Sarah Jane Leake | Bloomberg Law Leverage under the Alternative Investment Fund Managers Directive1 is defined as "any method by which the exposure of an AIF is increased whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means." From 23 July 2013, alternative investment fund managers (AIFMs) will have to set maximum leverage limits for each alternative investment fund (AIF) they manage – including all non-EU AIFs they market within the EU. Where it is considered necessary to maintain stability and integrity within Europe's financial markets, national regulators will have the power to impose specific limits on the level of leverage that an AIFM may employ with respect to each AIF under its management.2 While the AIFM Directive is intended to support strong and stable markets, many stakeholders fear that this new power may unwittingly cause market instability and exacerbate the market turmoil it seeks to address.
Managing Systemic Risk
The Importance of Leverage
A Step too Far?
To view additional stories from Bloomberg Law® request a demo now