Derivatives exposure limits require mutual funds to back positions, set trustee approved limits, and disclose exposures. Mutual funds may use derivatives solely for hedging or portfolio balancing; positions must not create leverage or short-sale exposures. All long derivative exposure must be backed by cash or equivalents and all short exposure by underlying stock. Boards of Trustees must predefine and approve maximum net derivatives exposure as a percentage of portfolio and per scrip/instrument limits, oversee risk containment, require notional value and gross position calculations (with no netting of reversals), perform worst case analyses, and ensure specified disclosure and regular reporting.
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Derivatives exposure limits require mutual funds to back positions, set trustee approved limits, and disclose exposures.
Mutual funds may use derivatives solely for hedging or portfolio balancing; positions must not create leverage or short-sale exposures. All long derivative exposure must be backed by cash or equivalents and all short exposure by underlying stock. Boards of Trustees must predefine and approve maximum net derivatives exposure as a percentage of portfolio and per scrip/instrument limits, oversee risk containment, require notional value and gross position calculations (with no netting of reversals), perform worst case analyses, and ensure specified disclosure and regular reporting.
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