New risk management requirements for Specialised Investment Funds - SIF

Solutions

New risk management requirements for Specialised Investment Funds (SIF)

SIF are now required to comply with tighter risk management and conflict of interest requirements. Deloitte can help your meet these new requirements.

Your regulatory challenge

The CSSF Regulation 12-01 introduced implementing measures regarding Article 42bis of the amended Law of 13 February 2007 on SIFs. All SIFs must now:

  • Establish a risk management function, hierarchically and functionally independent from operating units including portfolio management;
  • Oversee and monitor delegated risk management activities - the conducting officers remain fully liable for the adequacy and efficiency of the risk management system;
  • Implement and maintain a documented risk management policy and procedures covering at least market risk, liquidity risk, counterparty risk, and all other risks material to the fund including operational risk;
  • Implement processes to monitor risks material to the SIF and their contribution to the risk profile of the fund, as well as, when appropriate, monitoring of compliance with an internal risk limitation system;
  • Establish, implement and maintain an appropriate conflicts of interest policy, including identification, mitigation, management, record and disclosure policies;
  • Communicate to the CSSF a description of the risk management policy and of the conflict of interest policy as part of the authorisation file, and following any material change.
     

Transitional provisions

New SIFs must comply with this Regulation since inception. Existing SIF have until 31 December 2012 to comply with this Regulation.

Furthermore, anticipating the transposition of the AIFM Directive into Luxembourg Law, Regulation 12-01 brings also the opportunity for management companies and investment funds to benchmark their existing risk management procedures for Part II Funds against market practices and forthcoming new requirements.
 

Transitional provisions

Our risk management services and solutions for SIFs

We propose our client to develop a risk management framework based around the following building blocks, taking into account the scale, nature and complexity of the SIF:

  1. Organisation & governance
  2. Systems, measures & control
  3. Reporting & escalation procedures

Deloitte’s value proposition for risk management and conflict of interest for SIF covers the following areas:

  • Review, gap analysis and update of your risk management procedures and conflicts of interest policies;
  • Preparation and conducting of dedicated workshops to assist you in structuring your risk management procedures and conflicts of interest policies;
  • Assistance in specific areas such as: key risk indicators development, risk modelling, risk reporting design, stress testing design and implementation, initial due diligences, valuation methodologies review, vendor or service provider selection, etc.
  • Support your market, liquidity, credit or counterparty risk measurement and reporting;
  • Support your due diligence on contemplated acquisition;
  • Support your valuation of illiquid assets (for non-audit clients).
     

Contact

Xavier Zaegel, FRM

Xavier Zaegel, FRM

Partner | Capital Markets/Financial Risk Leader

Xavier is a partner within the advisory and consulting department and is the head of the Capital Markets practice in Luxembourg. As a market and credit risk specialist, he has been leading various ass... More

Sylvain Crépin, FRM

Sylvain Crépin, FRM

Partner | Capital Markets/Financial Risk

Sylvain Crepin joined Deloitte Luxembourg in January 2012 and is Partner in the Financial Risk Management department. He is specialised in risk management advisory and solutions for the investment fun... More