Investment restriction
Leverage and borrowing limit
A leverage and borrowing limit caps how far a portfolio's exposure or debt may exceed its own value. Policies write ‘no borrowing except a temporary overdraft of up to 10% of NAV’ or ‘leverage no more than 150% of NAV’. Acclimetry measures one named ratio over NAV: gross exposure, total notional, or negative balances in named cash classes.
leverage_limitLeverage / borrowing limit
How policies word it
‘Leverage’ means different things in different documents. A family-office policy may allow a credit line for liquidity; a trust deed may forbid borrowing outright. A fund's rules may cap the exposure its derivatives create.
The clause should name its measure:
- ‘Gross exposure no more than 200% of NAV’ limits exposure.
- ‘Overdrafts only, up to 10%, for no more than one month’ limits borrowing.
Regulators define leverage precisely. Under the AIFMD rules, leverage is exposure divided by NAV, calculated by a gross and a commitment method. Commitment leverage above three times NAV counts as substantial.
- The portfolio may borrow only by temporary overdraft, up to 10% of net asset value.
- Leverage, measured as gross exposure, may not exceed 200% of net asset value.
- Total notional exposure, including derivatives, is limited to 150% of NAV.
- No borrowing or margin trading is permitted.
How it is measured
The rule version names one methodology, and each answers a different question:
- Gross exposure ratio: every position's absolute value added up, longs and shorts alike, over NAV. An unleveraged long-only book reads about 100%.
- Notional ratio: absolute notionals over NAV. A position whose feed states no notional falls back to market value, and the fallback is disclosed.
- Borrowing ratio: negative balances in the named cash classes over NAV. A credit line drawn into a cash account shows here.
A notional fallback is not a proven figure. In one worked example, a holding without a notional leaves the result not evaluated rather than reading 230%.
Without named cash classes, the borrowing ratio has nothing to measure and is not applicable.
When it is breached and what follows
A ratio above the hard maximum is a breach, and warning bounds give notice first. Exposure ratios also rise passively when NAV falls, because the denominator shrinks.
Breaches join a case with assignment, escalation and service-level clocks. A policy allowing a few days to clear an excess maps to a grace period: the breach shows at once, the clocks wait.
Duration conditions, such as ‘for no more than one month’, are not computed. They can be held as a manual obligation with a scheduled attestation.
Data the check reads
- Market values for every position, longs and shorts, to compute NAV and gross exposure
- A notional for every position when the notional ratio is used
- The cash classes whose negative balances count as borrowing
- The methodology and hard maximum set in the rule version
Rule parameters
Economic leverage, commitment-approach notional leverage, or cash borrowing, as a share of NAV under the named methodology.
| Parameter | In the platform | Options and help |
|---|---|---|
| methodology | Methodology | |
| cashClassNames | Cash classes | Required for borrowing_ratio: classes whose negative balances are borrowing. |
Bounds the rule must set: hardMax
Methodology choices
- gross_exposure_ratio — sum of absolute signed exposures over NAV.
- notional_ratio — sum of absolute notionals (market value where the feed states none, disclosed as a fallback) over NAV.
- borrowing_ratio — sum of negative balances in the named cash classes over NAV.
Parameter names, methodology text and result-code meanings are shown exactly as the platform states them.
Worked examples, run by the engine
A 1,300 long and a 300 short net to 1,000, so gross exposure of 1,600 is 160% leverage, inside a 200% cap
Rule template:leverage_limit methodology: gross_exposure_ratio
Bounds: hard max 200%
| Holding | Long / short | Market value |
|---|---|---|
| L | long | 1,300 |
| S | short | -300 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Leverage | Compliant | 160% | ≤ 200% | 40% | WITHIN_LIMITS |
WITHIN_LIMITS: The measured value sits inside every approved bound.
Largest contributors: Leverage → L 130%, S 30%
These are the product's own test cases for this template, evaluated by the Acclimetry rule engine (backend commit 8197063). The build fails if any result changes.
A 200 overdraft in the cash class against a 1,000 net book is 20% borrowing, over a 10% cap
Rule template:leverage_limit methodology: borrowing_ratiocashClassNames: Cash
Bounds: hard max 10%
| Holding | Class | Market value |
|---|---|---|
| EQ | Stocks | 1,200 |
| OD | Cash | -200 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Borrowing | Breach | 20% | ≤ 10% | -10% | ABOVE_HARD_MAXIMUM |
ABOVE_HARD_MAXIMUM: The measured value exceeds the approved hard maximum, beyond any stated tolerance.
Largest contributors: Borrowing → OD 20%
These are the product's own test cases for this template, evaluated by the Acclimetry rule engine (backend commit 8197063). The build fails if any result changes.
A notional measure over a holding that states no notional falls back to market value and is disclosed — a 230% partial is never silently proven
Rule template:leverage_limit methodology: notional_ratio
Bounds: hard max 200%
| Holding | Class | Market value | Notional |
|---|---|---|---|
| FUT | Derivatives | 200 | 1,500 |
| EQ | Stocks | 800 | – |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Leverage | Not evaluated: data quality | – | ≤ 200% | – | MISSING_POSITION_DATA |
MISSING_POSITION_DATA: One or more positions had no readable value, and the partial numbers do not prove the outcome either way.
These are the product's own test cases for this template, evaluated by the Acclimetry rule engine (backend commit 8197063). The build fails if any result changes.
A 90,000 overdraft against a 1,000,000 net portfolio is 9% borrowing: inside the 10% cap but past the 8% warning bound. The positive dollar balance does not offset it.
Rule template:leverage_limit methodology: borrowing_ratiocashClassNames: Cash
Bounds: warn max 8% · hard max 10%
| Holding | Class | Market value |
|---|---|---|
| Equity portfolio | Equities | 700,000 |
| Bond portfolio | Bonds | 380,000 |
| Sterling current account (overdrawn) | Cash | -90,000 |
| US dollar deposit | Cash | 10,000 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Borrowing | Warning | 9% | ≤ 10% warning ≤ 8% | 1% -1% to warning | ABOVE_WARNING_MAXIMUM |
ABOVE_WARNING_MAXIMUM: The measured value has crossed the early-warning maximum but not the hard limit.
Largest contributors: Borrowing → Sterling current account (overdrawn) 9%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
Interpretation traps
Name the methodology
‘Leverage of 150%’ means different things under gross, notional and borrowing measures. Record which one the policy means as an author decision before the rule is approved.
This is not the AIFMD calculation
The gross ratio does not apply the Article 7 cash exclusions, and no methodology applies the Article 8 hedging and netting tests. AIFMD reporting figures need those steps.
Every position needs a notional
Under the notional ratio, any position without a notional, even a plain share, falls back to market value. The result is then not evaluated, or a breach under a conservative-breach policy.
Borrowing can sit in other classes
Only negative balances in the named cash classes count. A loan booked as its own liability class is not borrowing to this rule unless that class is named.
Result codes this check can return
| Code | State | Meaning | What to do |
|---|---|---|---|
| WITHIN_LIMITS ✓ | Compliant | The measured value sits inside every approved bound. | – |
| ABOVE_WARNING_MAXIMUM | Warning | The measured value has crossed the early-warning maximum but not the hard limit. | No breach yet; the early-warning band exists so the position can be managed before one. |
| BELOW_WARNING_MINIMUM | Warning | The measured value has crossed the early-warning minimum but not the hard limit. | No breach yet; the early-warning band exists so the position can be managed before one. |
| ABOVE_HARD_MAXIMUM ✓ | Breach | The measured value exceeds the approved hard maximum, beyond any stated tolerance. | Remediate the exposure, or record an approved waiver against the case. |
| BELOW_HARD_MINIMUM | Breach | The measured value falls below the approved hard minimum, beyond any stated tolerance. | Remediate the exposure, or record an approved waiver against the case. |
| CONSERVATIVE_MISSING_DATA | Breach | Data was missing and this rule version's approved unknown-data policy is conservative_breach, so the gap is treated as a breach rather than as Not Evaluated. | Supply the missing values; the reading is deliberately pessimistic until you do. |
| EMPTY_PORTFOLIO | Not applicable | The portfolio held no positions at the evaluation moment. | – |
| NO_BORROWING_POPULATION | Not applicable | The leverage methodology found no borrowing or financing to measure. | – |
| NOT_IN_SCOPE | Not applicable | This rule version does not apply to this portfolio — the portfolio is outside the version's stated scope. Recorded so that "considered and out of scope" can be told from "never run". | – |
| AGGREGATE_MEMBER_NOT_ACCEPTED | Not evaluated: data quality | A portfolio in the measured set has no authoritative snapshot, so the set-level number cannot be stated. | Accept the named portfolios' snapshots. A partial set produces no aggregate. |
| MISSING_POSITION_DATA ✓ | Not evaluated: data quality | One or more positions had no readable value, and the partial numbers do not prove the outcome either way. | Supply the missing valuations. The platform will not fabricate a zero to produce a reading. |
| SNAPSHOT_NOT_ACCEPTED | Not evaluated: data quality | The portfolio's newest snapshot awaits data-quality review; only accepted data may produce an authoritative result. | Accept, override or reject the snapshot on Data & Quality. |
| SNAPSHOT_REJECTED | Not evaluated: data quality | The portfolio's newest snapshot was rejected, so there is no authoritative data to measure. | Load a corrected file. |
| STALE_POSITIONS | Not evaluated: data quality | The newest snapshot is older than the organisation's staleness threshold. | Load current positions, or revisit the threshold on Data & Quality ▸ Policy. |
| STALE_PRICES | Not evaluated: data quality | A holding had no price on the position file and its approved price was older than the organisation's price-staleness threshold, so it was left unvalued. | Load a current price for the holding, price it on the position file, or revisit the threshold on Data & Quality ▸ Policy. |
| AWAITING_EXTERNAL_DATA | Pending external data | An approved input is late but still inside the organisation's grace window. This is not a pass and not an exception. | None yet. If the delivery does not arrive, this becomes a data-quality exception. |
| METHOD_NOT_SUPPORTED | Not evaluated: unsupported | The rule version asks for a measurement method this engine does not implement. Declared rather than approximated. | Choose a supported methodology, or treat this limit as a manual obligation until the method ships. |
| EVALUATOR_ERROR | Not evaluated: system error | The evaluator raised an error. Surfaced as a visible result rather than as silence. | Report it. A system error is never a pass and never a compliant reading. |
✓ seen in the worked examples. The rest come from the platform registry’s own scan of the template source.
Regulatory analogues
- AIFMD leverage: the gross method (Article 7)
- AIFMD leverage: the commitment method and substantial leverage (Articles 8 and 111)
Acclimetry evaluates one named leverage ratio over NAV: gross exposure, total notional with any market-value fallback disclosed, or negative balances in named cash classes. It does not apply the AIFMD Article 7 exclusions or Article 8 netting, and does not compute VaR. It does not track how long a borrowing lasts.
Questions
Is gross exposure the same as AIFMD gross leverage?
No. The AIFMD gross method first excludes certain cash and converts derivatives (Article 7). Acclimetry's gross ratio adds absolute position values over NAV without those steps.
What does a leverage figure of 100% mean?
On exposure measures, an unleveraged long-only portfolio reads about 100% of NAV. A 150% cap therefore allows exposure of one and a half times NAV. On the borrowing ratio, 0% means no borrowing.
How do I test ‘temporary borrowing for no more than one month’?
Set a borrowing-ratio rule with a 10% hard maximum for the amount. Hold the one-month condition as a manual obligation, attested on a schedule.
Sources
- Commission Delegated Regulation (EU) No 231/2013, Article 7 (gross method), UK version · OGL v3.0 · Read on12 October 2026
- Commission Delegated Regulation (EU) No 231/2013, Article 8 (commitment method), UK version · OGL v3.0 · Read on12 October 2026
- Commission Delegated Regulation (EU) No 231/2013, Article 111 (substantial leverage), UK version · OGL v3.0 · Read on12 October 2026