Overview
5th edition - Updated as of March 2024
AIMA & CAIA are pleased to publish this updated 5th edition risk rating guideline for Canada. This edition focuses on the internal risk ratings placed on funds by dealer platforms in Canada and how they may inaccurately differ from the historical risk-adjusted return of the specific fund or strategy indices (and for alternative mutual funds and alternative ETFs, how it may differ from the prospectus risk rating, as mandated by the Canadian Securities Administrators or CSA).
To foster dialogue around risk ratings and hedge funds, liquid alternative funds and private credit funds, this 5th edition is meant as a guideline for further discussion around these important strategies so that internal dealer risk ratings systems be revised to more fairly reflect historical risk-adjusted data from funds within indices.
The Associations’ updated risk rating guidelines for hedge funds, alternative mutual funds and private credit are outlined below, with the full guidelines available for download.
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Claire Van Wyk-Allan
Managing Director, Head of Canada and Investor Engagement, Americas
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Steven Novakovic
Managing Director, CAIA Curriculum, CAIA Association
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Jiří Krόl
Deputy CEO, Global Head of Government Affairs and Global Head of the Alternative Credit Council
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Nick Smith
Managing Director, Private Credit
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Robert Lemon
Executive Director & Head of Clearing, CIBC Capital Markets
Table 1
Table 1: Proposed risk rating for hedge funds and alternative mutual funds based on the median trailing standard deviation of funds within CISDM indices
Source: CAIA Association, AIMA, CISDM. Data as of 12/31/2023.
Table 2
Table 2: Proposed risk rating for private credit funds based on S&P & Cliffwater indices
Source: CAIA Association, AIMA/ACC, 2023.