Relative VaR methodology
1. Under the relative VaR methodology the global exposure of the Retail Investor AIF is calculated as follows:
(a) Calculate the VaR of the Retail Investor AIF's current portfolio (which includes derivatives);
(b) Calculate the VaR of a reference portfolio;
(c) Check that the VaR of the Retail Investor AIF's portfolio is not greater than twice the VaR of the reference portfolio in order to ensure a limitation of the global leverage ratio of the Retail Investor AIF to 2. This limit can be presented as follows:
2. The reference portfolio and the related processes shall comply with the following criteria:
(a) The reference portfolio should be unleveraged and should, in particular, not contain any FDI or embedded FDI, except that:
• a Retail Investor AIF engaging in a long/short strategy may select a reference portfolio which uses FDI to gain the short exposure; and
• a Retail Investor AIF which intends to have a currency hedged portfolio may select a currency
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