September 5, 2025
European policymakers have warned that the use of value-at-risk models by some UCITS funds is enabling leverage levels that rival—or exceed—those of hedge funds, raising concerns about market resilience and the UCITS brand. An EU systemic risk report highlights liquidity and market risks associated with these practices. Michael Pedroni of Highland Global Advisors cautions that the analysis does not fully account for how leverage constraints tighten as market volatility increases.