Investment funds that hold loans in their portfolios represent a number of risks, but that these risks are not yet serious enough to warrant further regulatory activity, according to a report published on Wednesday by the International Organization of Securities Commissions (IOSCO).

The Findings on the survey of loan funds examines the market for “loan funds” — including both funds that originate loans, and funds that participate in existing loans — in different jurisdictions.

Although these funds represent a “relatively small share of the global fund industry” they are becoming an increasingly important source of finance, IOSCO says in a statement. Moreover, these funds “are quite different from traditional funds, and have not yet been closely scrutinized,” the IOSCO report says.

To address that lack of oversight, IOSCO undertook research to assess the loan fund market in various jurisdictions, and to identify risks in this area. Those risks include: liquidity risk; credit risk; systemic risks from excessive credit growth; and a risk of regulatory arbitrage.

Yet, despite these risks, the IOSCO report says many jurisdictions consider their rules for investment funds generally “to be sufficient to address the specificities of loan funds.”

For example, the report notes that regulators in Canada allow loan participating funds, but not loan originating funds, and there are restrictions on the portfolio activities of the funds that are permitted.

Ultimately, the report concludes that further work on loan funds is not warranted at this stage. It says IOSCO “will continue to monitor this segment of the fund industry with a view to possibly revisiting it for further work, depending on market developments.”