CA-3.2.27
Investments in funds (e.g. mutual funds, Collective Investment Undertakings etc.) must be risk weighted as follows:
(a) If the instrument (e.g. units) is rated, it should be risk-weighted according to its external rating (for risk-weighting, it must be treated as a "claim on corporate");
(b) If not rated, such investment should be treated as an equity investment and risk weighted accordingly (i.e. 100% for listed and 150% for unlisted);
(c) The conventional bank licensee can apply to CBB for using the look-through approach for such investments if it can demonstrate that the look-through approach is more appropriate to the circumstances of the conventional bank licensee ;
(d) If there are no voting rights attached to investment in funds, the investment will not be subjected to consolidation, deduction or additional risk weighting requirements (in respect of large exposures or significant investments); and
(e) For the purpose of determining the "large exposure limit" for investment in funds, the look-through approach must be used (even if the look-through approach is not used to risk weight the investment).
January 2015