Gearing

A - Minimum compliance

  1. Each fund must disclose its maximum permitted level of gearing.
  2. All funds should disclose the total exposure to gearing – both gross and net of cash balances held by the fund (whether on or off balance sheet) as at the balance sheet date as a percentage of net asset value as compared to the maximum permitted level of gearing.
  3. Whether it has exceeded maximum permitted level of gearing.

 

B - Best practice

Each fund should show: 


  • The amount of each variable rate loan and the interest rate terms
  • The amount of each fixed rate loan, the interest rate and the date on which the 
loan is due for repayment, together with the cost of breaking the loan facility
  • The amount of any interest rate swaps, the rate of the swap and the date on which
the swap expires
  • For each of the above, the name of the counterparty, the value of any security, and the market value
  • The fund’s proportionate share of the debt and cash of each of any collective investment scheme property

 

In addition: 


  • All financial instruments should be accounted for at fair value in accordance with the appropriate accounting standards adopted. In this way any hedging instruments will be marked to market and included within a fund’s reported NAV.
  • Where a fund is exposed to fixed rate liabilities that are not accounted for at fair value as per above recommendation, there should be an appropriate adjustment made to the fund’s pricing to reflect the fair value of such liabilities.