Exposure & Concentration Limits
Sector, country, currency, issuer, and counterparty exposure calculations with lookthrough, netting, and stress testing.
Exposure engine
Asset Atrium's exposure calculator runs in two modes: real-time (for pre-trade what-if analysis using Oracle Coherence cached data) and batch (for post-trade compliance using official NAV positions from Oracle RAC). Both modes use the same calculation logic to ensure consistency.
Exposure dimensions
The compliance engine calculates portfolio exposure across multiple dimensions. Each dimension can be used as the basis for compliance rules and limits.
| Dimension | Calculation Basis | Common Limit Types |
|---|---|---|
| Issuer | Aggregate market value of all positions in securities issued by the same legal entity (including subsidiaries via issuer grouping) | UCITS 5/10/40; max single issuer % |
| Sector (GICS) | Market value weight per GICS sector/industry group, sourced from Bloomberg classification | Max sector weight; relative-to-benchmark band |
| Country | Country of risk (not domicile) based on Bloomberg COUNTRY_OF_RISK field | Max single country; max emerging markets |
| Currency | Net exposure per currency after hedging overlay; split into hedged and unhedged components | Max unhedged non-base currency exposure |
| Credit Rating | Weighted average credit rating using middle-of-three (Moody's, S&P, Fitch); individual position rating floors | Min avg rating; max % below investment grade |
| Asset Class | Broad classification: equities, fixed income, alternatives, cash, derivatives | Min/max asset class allocation bands |
| Counterparty | Net mark-to-market exposure to OTC derivative counterparties after netting and collateral | Max counterparty exposure (UCITS Art. 52) |
| Liquidity | Time-to-liquidate classification based on average daily volume and position size | Min % liquidatable within N days |
| Duration / DV01 | Effective duration and dollar value of a basis point for fixed income portfolios | Duration band; max DV01 |
| Maturity Bucket | Fixed income positions grouped by remaining maturity (0-1Y, 1-3Y, 3-5Y, 5-10Y, 10Y+) | Max % in maturity bucket |
UCITS concentration rules (5/10/40)
For UCITS-regulated funds, Asset Atrium enforces the issuer concentration limits defined in UCITS Directive Article 52:
| Rule | Limit | Description |
|---|---|---|
| 5% Rule | Max 5% NAV in any single issuer | Default maximum exposure to any single issuer's transferable securities |
| 10% Exception | Max 10% NAV in a single issuer (with conditions) | Up to 10% allowed for select issuers, provided total of all 5-10% positions does not exceed 40% NAV |
| 40% Aggregate Cap | Max 40% NAV in issuers where exposure exceeds 5% | Sum of all positions exceeding 5% in a single issuer must not exceed 40% of fund NAV |
| 20% Group Limit | Max 20% NAV in a single group of connected issuers | Aggregate exposure to entities within the same corporate group |
| 35% Government Exception | Max 35% in government/public issuer (extendable to 100%) | Government bonds may exceed 5% limit; 100% allowed if from 6+ different issues |
Lookthrough calculation
When a fund holds units in other collective investment schemes (fund-of-funds) or structured products, Asset Atrium performs lookthrough analysis to calculate the true underlying exposures:
- Fund-of-funds: Underlying fund holdings are decomposed to calculate issuer, sector, and country exposures at the security level.
- ETFs: Index composition is used as a proxy when full holdings are not available; refreshed daily from fund administrator feeds.
- Structured products: Underlying reference assets are identified for concentration and credit quality checks.
- Derivatives: Notional exposure and delta-adjusted exposure are calculated for the underlying reference instrument.
Lookthrough depth
Asset Atrium supports configurable lookthrough depth (1 level, 2 levels, or full recursive). For UCITS funds, at least one level of lookthrough is required for fund-of-fund holdings. Deeper lookthrough increases computation time but provides more accurate concentration measurement.
Derivative exposure calculation
Asset Atrium supports two methods for calculating global derivative exposure as required by UCITS:
| Method | Applicability | Calculation |
|---|---|---|
| Commitment Approach | Funds with simple derivative usage (hedging, efficient portfolio management) | Convert each derivative to equivalent position in underlying; apply netting and hedging rules per CESR/10-788 |
| VaR Approach (Relative) | Funds with complex derivative strategies | 99% / 20-day VaR of fund must not exceed 2x VaR of derivative-free reference portfolio |
| VaR Approach (Absolute) | Funds without a suitable reference portfolio | 99% / 20-day VaR must not exceed 20% of fund NAV |
Stress testing
Asset Atrium integrates stress testing with compliance monitoring to assess how portfolios behave under adverse scenarios:
- Historical scenarios: Replay market conditions from specific dates (for example, 2008 GFC, 2020 COVID, 2022 rate shock) against current portfolio.
- Hypothetical scenarios: User-defined shocks to interest rates, equity markets, credit spreads, or FX rates applied simultaneously.
- Compliance impact: After applying stress scenario, all compliance rules are re-evaluated to identify rules that would breach under stress.
- Reporting: Stress test results are included in AIFMD Annex IV reporting and internal risk committee reports.
Counterparty exposure netting
OTC derivative counterparty exposure calculations apply netting only where a valid ISDA Master Agreement and Credit Support Annex (CSA) are documented in Asset Atrium. Without a confirmed netting agreement, gross positive exposure is used for compliance limit checks.
Exposure dashboard
The ATIM compliance dashboard provides a real-time heat map of exposure concentrations across all dimensions. Cells approaching 80% of their limit threshold are highlighted amber; cells exceeding 90% are highlighted red. This gives portfolio managers early warning before breaching limits.