United States: What Kind Of A Derivatives User Is Your Fund?
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Rule 18f-4 is somewhat
unusual in that it gives management investment companies (including
business development companies but excluding money market funds, “Funds”) alternative means of complying with its
exemption from Sections 18 and 61. A Fund may either:
- Limit the way and extent to which the Fund engages in
derivatives transactions (a “Limited Derivatives User”),
- Adopt a Derivatives Risk Management Program (a “DRM
Program”) that, among other requirements, limits the
Fund’s Value-at-Risk (“VaR”) relative to an index,
its non-derivatives portfolio or its net assets (a “VaR
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guide to the subject matter. Specialist advice should be sought
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