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Limit definitions based on Analytics

When using values from Analytics Plus, limit definitions allow you to flexibly identify the level of analysis with two-level grouping and close to 30 different grouping criteria, and extend your limit definition with filtering, sorting, limiting and summing up values. You can define your limits either as absolute or relative values, and define minimum and maximum thresholds for warnings and breaches on each individual investment limit.

Your limit definition consists of two sections: Value(s) to compare (numerator) and Summed value to compare against (denominator). These two sections allow you to set up a limit definition as "relative values" or "absolute values":

  • For relative values (e.g. "Individual stock position cannot exceed 10% of portfolio's total market value."), fill in the Value(s) to compare (numerator) section on the left with the value you want to compare (i.e. identify the exact value you want to comparem such as "Individual stock position") and the Summed value to compare against (denominator) section on the right with the value you want to compare against (i.e. identify the exact value you want to compare the first value against, such as "Total market value of the portfolio"). As a result, your limit value will be a percentage out of these two with the formula Value(s) to compare / Summed value to compare against (e.g. "Individual stock position" / "Total market value of the portfolio" = x %). For relative values, you need to identify what to compare and the value to compare against in order to get a percentage out of the equation.

  • For absolute values (e.g."Total market value of Finnish stocks cannot exceed 10 000 €"), fill in only the Value(s) to compare section on the left (i.e. identify the exact value you want to analyze, such as "Total market value of Finnish stocks"). For absolute values, you only need to identify for the one specific value, so no comparison is needed.

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For both sections, you can define / identify the value you want to use to compare through setting it up with different groupings, filtering and other parameters.

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(1) Choose the value to analyze.

Value to analyze

Choose which one-day value (such as Market value, Amount or Exposure) you want your limit to analyze. The options available here correspond with the columns available in Analytics Plus. You can use any of the figures available in Analytics+ as values within limit definitions - however that limit definitions are based on one-day values from Analytics+, and in effect, you can only use values that are available and make sense for one day! For example, Market value and Exposure are available for one day, whereas TWR cannot really be calculated for a single day. If you are unsure, you can always go into Analytics+ and analyze a portfolio for one day (set start date and end date the same) to see which figures make sense. You can also use your tailored Analytics+ columns and formulas as a value to analyze within your limit definitions (available from FA 3.7 onward).

(2) You can use grouping and filtering to identify the component / search the level you want to analyze. If you don't use grouping and filtering, the Value to analyze is picked from portfolio's total (i.e. "Portfolio's total market value") - if you want to analyze an individual component instead (e.g."Individual stock position" or "Finnish stocks"), you can identify it with grouping and filtering.

First group by

Identify which components / level your limit should analyze. You can use various security-related parameters to search for the correct level, such as TYPE (Security type), CLASS1 - 5, COUNTRY, CURRENCY, or GROUP (Asset class) and SECTOR (Asset type). For example, you can set up a limit of "Individual security type should not exceed x%" by grouping with TYPE - this will analyze each security type's total value and compare it against the thresholds.

(Filter the group by)

If you wish, define a filter to narrow down the grouping, i.e. to only include certain values from the group or exclude certain values from the group you identified above. You can define your filter with codes relevant to your group by - for example, if you filtered with TYPE, you can use security type codes, such as STOCK or BOND, to include only certain types. You can find the codes you can use the filter through Preferences.

  • Include one value - define the code of the value you want to include, e.g. STOCK or BOND. This allows you to pick up one individual value to analyze, for example "Stocks should not exceed x%".

  • Include multiple values - define the codes of the values you want to include as a comma-separated list, e.g. STOCK,BOND. This allows you to pick up multiple individual values to analyze, for example "Neither stocks or bonds should not exceed x%".

  • Exclude values - add an exclamation mark (!) before the code you want to exclude, e.g. !STOCK or !BOND. This allows you to exclude a singe value from being analyzed, for example "Any other security type except bonds should not exceed x%".

Then group by

If you wish, identify which components within the first group your limit should analyze, allowing you to drill down even further into your portfolio to find the correct level to analyze. For example, you can set up a limit of "Individual stock position should not exceed x%" by grouping first by TYPE, filter with STOCK, and then group by SECURITY - this will analyze each stock security's value and compare it against the thresholds.

(Filter the group by)

If you wish, define a filter to narrow down the second grouping. For example, you can set up a limit of "Stocks from Finland should not exceed x%" by grouping first by TYPE, filter with STOCK, then group by COUNTRY, and filter with FI.

Code for group, sector or tag

If you are using either GROUP (Asset class), SECTOR (Asset type) or TAG within your group by, you should also select which allocation group or tag group to include. You can link multiple allocations or tag groups to your securities - if using those for limit definitions, you need specifically select which allocation or tag group you want to use.

  • GROUP (Asset class) or SECTOR (Asset type) - define the allocation you want to use with the allocation group code defined in Preferences, Asset classes and types. For example, you can define that this limit is based on ASSET allocation or GICS allocation.Asset classes and types

  • TAG - define the tag group you wan to use with the tag group code defined in Preferences. For example, you can define that this limit is based on tags within a specific tag group.

(3) You can further define how the found values are considered. These fields are most useful when defining limits that depend for example on "Largest / smallest x investments", or if you want to analyze a sum of values, such as "Sum of stocks and bonds".

Value to sort by

If you want to sort the components you found with your grouping and filtering, select the value you want to use for sorting - options available are the same as in the Value to analyze field. For example, you can set up a limit based on "Largest x investments" by grouping by SECURITY and sorting by Market value.

Sort ascending instead of descending

Define if the above sorting is considered as ascending or descending. When enabled (default), your sorting is ascending (e.g. "Bottom investments"). When disabled, your sorting is descending (e.g."Top investments")

Include at most

Include only a certain number of observations, useful for limits such as "Top 10 investments" or "Bottom 5 investments". Define with a whole number on how many observations you want to include.

Sum up all the values instead of analyzing them individually

Define if the observations you have identified with grouping, filtering and sorting are considered as one sum or as individual items to analyze.

  • When disabled (default), all observations you have found with grouping and filtering are analyzed separately - if any of the observations result in a breach, your entire limit is breached. For example, you don't want to sum up values for "Any of the top 5 investments should not exceed 10%".

  • When enabled, all observations you have found with grouping, filtering and sorting are summed up and analyzed as one total value - only if this total value is above your breach threshold, your limit is breached. For example, you want to sum up values for "Sum of top 5 investments should not exceed 10%".

Include positions from linked portfolios

Calculate limits based on the underlying positions from the linked portfolios.

Finally, define the minimum and maximum warning and breach thresholds.

  • In case of absolute values, define the thresholds with a numeric value in the same "unit" as your limit definition fetches. For example, you could define maximum warning threshold as "9 000" and maximum breach threshold as "10 000" for "Total market value of Finnish stocks cannot exceed 10 000 €" - you would get a warning when total market value of Finnish stocks exceeds 9 000€ and a breach when total market value of Finnish stocks exceeds 10 000€.

  • In case of relative values, define the threshold with a numeric value between 0 and 1 - relative values are always analyzed as percentages, which is defined as decimal (e.g. 10% threshold defined as 0,1). For example, you could define maximum warning threshold as "0,09" and maximum breach threshold as "0,10" for "Stock position's share in the portfolio cannot exceed 10% of portfolio's total market value" - you would get a warning when market value of any stock position exceeds 9% of the total market value of the portfolio and a breach when market value of any stock position exceeds 10% of the total market value of the portfolio.

Limit definitions allow you to flexibly define even very complex investment constraints for you to monitor. Find below examples of different types of limit definitions you can set up - use these examples as a benchmark on how to set up your own limits!

Min / max shares

"Stock position's share in the portfolio cannot exceed 10% of portfolio's total market value."

Value(s) to compare

Summed value to compare against

  • Value to analyze Market value

  • First group by TYPE

  • Filter the group by STOCK (use your security type code for "stocks")

  • Then group by SECURITY

  • Value to analyze Market value

Minimum warning / breach threshold

Maximum warning / breach threshold

  • Define as percentage with a number between 0 and 1 (e.g. define 10% as 0,10)

Analyzes the market value of each individual security of the type "stock".

Compares against the total market value of your portfolio.

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This type of a setup allows you to tackle any limits of "Individual position in a security / security type / asset class / issuer / security class / etc. based on market value cannot exceed x% of portfolio's total market value" - just use different grouping and filtering on the left to identify the level you want to compare against your portfolio's total market value!

Top / bottom X shares

"Top 10 biggest investments based on market value cannot exceed 40% of portfolio's total market value."

Value(s) to compare

Summed value to compare against

  • Value to analyze Market value

  • First group by SECURITY

  • Value to sort by Market value

  • Sort ascending instead of descending disabled

  • Include at most 10 (or the number of top investments you want to include)

  • Sum up all the values instead of analyzing them individually enabled

  • Value to analyze Market value

Minimum warning / breach threshold

Maximum warning / breach threshold

  • Define as percentage with a number between 0 and 1 (e.g. define 40% as 0,40)

Sums up the market values of largest 10 individual positions and analyzes that.

Compares against the total market value of your portfolio.

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This type of a setup allows you to tackle any limits of "Top/bottom x investments cannot exceed x% of portfolio's total market value" - just sort ascending or descending to include bottom or top investments and define how many positions to include on the left to include the number of investments to compare against your portfolio's total market value.

Similarly, if you disable the Sum up all the values instead of analyzing them individually from the left, you can with the otherwise similar setup set up limits such as "Any of the top 5 investments cannot exceed 10% of the portfolio's total market value", analyzing each of the top/bottom positions individually instead of summing them up. With such a setup, if any of your top 5 investments breach the limit, then you entire limit is breached.

Absolute values

"Total market value of Finnish stocks cannot exceed 10 000 €."

Value(s) to compare

Summed value to compare against

  • Value to analyze Market value

  • First group by TYPE

  • Filter the group by STOCK (use your security type code for "stocks")

  • Then group by COUNTRY

  • Filter the group by FI (use your country code for "Finland")

Minimum warning / breach threshold

Maximum warning / breach threshold

  • Define as a "value" you shouldn't exceed (e.g. define 10 000 € as 10 000,00)

Analyzes the total market value of securities of the type "stock" with country "Finland".

compliance_exampl_absolute_value.png

This type of a setup allows you to tackle any limits of "Value of something cannot exceed a fixed threshold" - just use different grouping and filtering on the left to identify the level you want to follow up.

Relative values

"Total value of Finnish stocks cannot exceed the total value of Swedish stocks."

Value(s) to compare

Summed value to compare against

  • Value to analyze Market value

  • First group by TYPE

  • Filter the group by STOCK (use your security type code for "stocks")

  • Then group by COUNTRY

  • Filter the group by FI (use your country code for "Finland")

Minimum warning / breach threshold

Maximum warning / breach threshold

  • Define as a "value" you shouldn't exceed (e.g. define 10 000 € as 10 000,00)

Analyzes the total market value of securities of the type "stock" with country "Finland".

compliance_example_relative_value.png

This type of a setup allows you to tackle any limits of "Value of something cannot exceed the value of something else" - just use different grouping and filtering on both sides identify the level you want to compare and the level you want to compare against.