Global Trustee and Fiduciary Services Bite-Sized Issue 6 2026

AIFMD Annual Risk Assessment of Leveraged AIFs in the EU – 2025 On 6 May 2026, the European Securities and Markets Authority (ESMA) published the findings of the 2025 risk assessment of leveraged Alternative Investment Funds (AIFs), within the framework defined by ESMA’s Guidelines on AIFMD Article 25.2, focusing on leverage related risks and the potential systemic relevance of different AIF categories. ESMA says its findings include: • Overall assessment : Most AIFs do not employ substantial leverage, although a small number continue to report very high levels. Among substantially leveraged funds, the median leverage ratio stands at 446%, with around 70 funds reporting ratios above 1,787%. Leverage reported by funds declined on average across fund categories. ESMA says this development is not economically significant, as ESMA applied a stricter approach to outlier removal in this edition by filtering out more extreme values, which lowered the statistics. 68% of open-ended AIFs offer weekly redemptions and liquidity mismatches differ significantly across fund types. • Real estate (RE) funds: The RE fund sector remains concentrated in a limited number of jurisdictions, each subject to differing rules on leverage limits and redemption frequency. These divergences explain the presence of liquidity mismatches in some markets, even where liquidity management tools, such as notice periods, are widely used. Despite outflows and falling property prices, the sector has shown resilience. Nevertheless, national competent authorities (NCAs) continue to monitor RE funds closely, particularly in jurisdictions where outflows could challenge the funds’ ability to meet redemption request, as evidenced by suspensions of funds during and after the reporting period. • Hedge funds (HFs) : Hedge funds exhibit the highest leverage levels, notably in strategies heavily reliant on derivatives, such as macro and relative value strategies. At group level, NCAs paid particular attention to crowded trades (e.g., basis trades or other concentrated positions) to assess potential risks stemming from disorderly unwinding or market impact. • Other AIFs : As reported in previous risk assessments, the category “Other AIFs” represent the largest share of the AIF sector. This category includes GBP-denominated Liability-Driven Investment (LDI) funds, which use leverage to gain exposure to the UK government bond market and have been subject to enhanced resilience requirements and intensified monitoring since 2022. ESMA compares these with EUR-denominated LDI funds, which are not subject to the same measures and may employ significant leverage levels. Finally, ESMA says it presents newmethodological enhancements designed to identify groups of funds that may pose systemic risks. Drawing on an occasional paper by the European Systemic Risk Board, the European Central Bank, ESMA and Luxembourg’s Commission de Surveillance du Secteur Financier, this new approach successfully identifies relevant fund cohorts through an analysis of their assets and return profiles. ESMA encourages the use of this methodology by NCAs in future risk assessments. Link to ESMA TRV Risk Analysis here Investor Services Bite-Sized Global Trustee and Fiduciary Services Quick LInks Issue 6 | 2026 AIFMD CRYPTOASSETS FINTECH FSB IOSCO MIFID II/MIFIR MONEY MARKET FUNDS OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG T+1 ASIA PACIFIC EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM