The Committee of European Securities Regulators (Cesr) has released a series of guidelines on how to calculate risk under Ucits IV, reports Hedgefund Review. The key element of the report is a unified definition of global exposure. Cesr notes that whilst the responsibility lies firmly with the Ucits fund manager on deciding which methodology to use (commitment approach or VaR), it recommends that those using financial derivatives as part of a complex investment strategy – namely option, arbitrage and complex long/short or market neutral strategies – should avoid using the commitment approach. The report states that using relative VaR to determine global exposure should be calculated by establishing the VaR of a current portfolio against that of a reference portfolio, ensuring that the final VaR is no more than a factor of two. For absolute VaR, Cesr stipulates that it cannot be more than 20 per cent of the fund’s NAV, must be calculated daily and have a have a holding period equivalent to one month.