Global Credit Data, in collaboration with AFME, has published a new report providing empirical evidence on the risk profile of fund exposures under Basel 3.1. The analysis draws on a unique dataset of more than 40,000 funds collected from 13 banks, complemented by GCD’s LGD and EAD Data Pool, to assess default behavior and loss characteristics across a broad range of fund types.
The study is particularly relevant in the context of the Basel 3.1 output floor, which sets a lower bound on model-based capital requirements. Under CRR3, most fund exposures are treated as unrated corporates and subject to a standardized risk weight of 65% or higher for sub-investment grade exposures.
The findings show that, across the dataset, funds exhibit low default rates and comparatively strong recovery performance. Average IRB risk weights are estimated at around 22%, significantly below the 65% standardized floor for investment-grade funds. For most fund types—including mutual funds, pension funds, and REITs—risk weights typically fall in the range of 10% to 20%, with somewhat higher levels observed for more complex structures such as private equity, private debt, and funds of funds.
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