I have heard that derivatives should appear in the counterparty risk module instead of market risk concentration module. However, Article 189 of the regulation would seem to indicate that this applies to derivatives that are "risk-mitigation contracts" but not credit derivatives.

My query is on what should be done for derivatives which are part of collective investment undertaking look-through. Granted, most directly held derivatives of a smallish, standard model insurance company would likely be for hedging/risk mitigating purposes. However, a collective investment undertaking holds many derivatives as outright bets on the market as well as holding some for hedging purposes (eg FX forwards for currency risk). This distinction is made in AIFMD Annex IV regulation where FX trades are classified as being held for investment or for hedging purposes and derivatives involved in general hedging/netting arrangements can be identified. So should all indirectly held derivatives (other than credit derivatives) appear in the counterparty module or only those that can be deemed as being “risk mitigating”? And what if the distinction between hedging/investment is not available (as it sometimes isn’t in practice for Annex IV)?