Set up investment limits for mutual fund portfolios
Mutual fund portfolios often have very specific investment policies defined in their rules and in the governing law. For example, in the European Union, UCITS funds are governed by the investment policies defined in Chapter 7 of the UCITS directive, local laws, and fund rules. In FA, you can define the limits and use them to make sure that your mutual fund follows the investment policies. You might need to adjust them to suit your local laws or fund rules.
These limits, like any other limits, are defined as explained in Set up limit definitions. All limits listed here are of type Analytics. Suggested thresholds are listed in Minimum breach, Minimum warning, Maximum warning, Maximum breach order and can be added as such in the Preferences or modified to suit your needs.
To make the limit Sum of holdings of a transferable security/money market instrument issued by a single issuer having more than 5 % share, you need the Analytics+ custom column Share over five percent. This can be installed as an optional package. See Optional packages
In the limit definition table, the limits use a Classification 1 for defining how a security should be treated in the limits (issued by a government or similar, covered bond or other). These need to be defined in Preference → Securities → Class 1. Furthermore, it's a good idea to also define an option for cash and bank deposits that is set on securities of type Currency (limits and Analytics+ treat bank accounts as currencies), since the limits for them are separate. In the table below, you can find the suggested Classification 1s used in the limit definitions below.
Code | Name |
|---|---|
CASH | Deposits |
COVERED | Covered bond |
GOVERNMENT | Government guaranteed |
NONREGULATED | Non-regulated market |
NONUCITS | Non-UCITS fund |
OTCDERIVATIVE | OTC derivative |
OTHER | Other |
In the table below you can see suggested definitions for limits that are useful when checking investment policies of UCITS funds. Follow the instructions in Set up limit definitions to add them in Preferences and link to your fund portfolios.
Type of limit | Potential application | Value(s) to compare (numerator) | Value(s) to compare (denominator) | Suggested thresholds |
|---|---|---|---|---|
Holdings of transferable securities/money market instruments that do not trade on a regulated market | UCITS 50.2 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: OTCDERIVATIVE This example assumes that the securities that are traded on non-regulated markets are market with Class 1 OTC derivative. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.09 / 0.10 |
Holdings of transferable securities/money market instruments issued by a single issuer that is a government, state, municipality or similar | UCITS 52.1 UCITS 52.3 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: GOVERNMENT (use the code of the Classification 1) Then group by: ISSUER This example assumes that the securities that are issued or guaranteed by the government, state, municipality or similar are identified as Class 1 Government bond. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.30 / 0.35 |
Holdings of a covered bond issued by a single issuer | UCITS 52.1 UCITS 52.4 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: COVERED (use the code of the Classification 1) Then group by: ISSUER This example assumes that the covered bond securities are identified as Class 1 Covered bond. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.20 / 0.25 |
Sum of all holdings of covered bonds issued by a single issuer | UCITS 52.4 | Same as above for Holdings of a covered bond issued by a single issuer, but, in addition, select Sum up all the values instead of analyzing them individually. | Value to compare against: Market Value | 0.00 / 0.00 / 0.75 / 0.80 |
Holdings of a transferable security/money market instrument issued by a single issuer | UCITS 52.1 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: OTHER (use the code of the Classification 1) Then group by: ISSUER This example assumes that the other securities are identified as Class 1 Other. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.09 / 0.10 |
Sum of holdings of a transferable security/money market instrument issued by a single issuer having more than 5 % share | UCITS 52.1 | Value to analyze: Share over five percent (Analytics+ custom column) First group by: CLASS1 Filter the group by: OTHER (use the code of the Classification 1) Then group by: ISSUER This example assumes that the other securities are identified as Class 1 Other. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Share Of Total | 0.00 / 0.00 / 0.35 / 0.40 |
Holdings of transferable securities/money market instruments issued by issuers in the same Group | UCITS 52.5 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: OTHER (use the code of the Classification 1) Then group by: SECTOR Code for group,sector or tag: COMPANYGROUP This example assumes that the other securities are identified as Class 1 Other. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.15 / 0.20 |
Deposits at a single credit institution | UCITS 52.1 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: CASH (use the code of the Classification 1) Then group by: ISSUER This example assumes that the deposits are identified as Class 1 Deposits. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.15 / 0.20 |
Total exposure from derivatives | UCITS 51.3 | Value to analyze: Absolute Exposure First group by: TYPE Filter the group by: O,F,H,J,FXCONTRACT,FUTCF Select Sum up all the values instead of analyzing them individually | Value to compare against: Market Value | 0.00 / 0.00 / 0.90 / 1.00 |
Counterparty exposure from OTC derivatives | UCITS 51.1 | Value to analyze: Absolute Exposure First group by: CLASS1 Filter the group by: OTCDERIVATIVE (use the code of the Classification 1) Then group by: ISSUER This example assumes that the other securities are identified as Class 1 OTC derivative. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.09 / 0.10 |
Holdings of a single fund | UCITS 55.1 | Value to analyze: Market Value First group by: TYPE Filter the group by: C,CE Then group by: SECURITY | Value to compare against: Market Value | 0.00 / 0.00 / 0.19 / 0.20 |
Holdings of non-UCITS funds | UCITS 55.2 | Value to analyze: Market Value First group by: CLASS1 Filter the group by: NONUCITS (use the code of the Classification 1) This example assumes that the securities that are non-UCITS funds are identified as Class 1 Non-UCITS fund. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. | Value to compare against: Market Value | 0.00 / 0.00 / 0.25 / 0.30 |
Share of outstanding non-voting shares | UCITS 56.2 | Value to analyze: Holding % First group by: TAG Filter the group by: No voting rights Then group by: Security This example assumes that the securities that are non-voting shares are tagged with the tag No voting rights. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. Please note that this limit does not sum together different classes of non-voting shares from the same issuer, as it is not clear how such should be aggregated together. This limit is therefore conservative and alerts if the holdings in any share class are above the threshold, which also guarantees that the total holding in non-voting shares from the same issuer is below the threshold. | 0.00 / 0.00 / 0.09 / 0.10 | |
Share of external fund | UCITS 56.2 | Value to analyze: Holding % First group by: TYPE Filter the group by: C,CE Then group by: Security Please note that this limit does not sum together different share classes in a single fund, as it is not clear how such should be aggregated together. This limit is therefore conservative and alerts if the holdings in any share class are above the threshold, which also guarantees that the total holding in the fund is below the threshold. | 0.00 / 0.00 / 0.20 / 0.25 | |
Share of issued debt securities | UCITS 56.2 | Value to analyze: Holding % First group by: SUBTYPE Filter the group by: DB,DC,DW,DT,DS,DE,DG,DA,DN,DD,DM Then group by: Security Please note that this limit does not sum together different bonds from the same issuer. This limit is therefore conservative and alerts if the holdings in any debt instruments are above the threshold, which also guarantees that the total holding in the fund is below the threshold. | 0.00 / 0.00 / 0.09 / 0.10 | |
Share of issued money market instruments | UCITS 56.2 | Value to analyze: Holding % First group by: SUBTYPE Filter the group by: DY Then group by: Security Please note that this limit does not sum together different money market instruments from the same issuer. This limit is therefore conservative and alerts if the holdings in any money market instruments are above the threshold, which also guarantees that the total holding in the fund is below the threshold. | 0.00 / 0.00 / 0.09 / 0.10 | |
Max exposure from transferable securities/money market instruments (excl. covered bonds and bonds issued or guaranteed by governments)/OTC derivatives/cash per issuer | UCITS 52.5 | Value to analyze: Absolute Exposure First group by: CLASS1 Filter the group by: OTHER,OTCDERIVATIVE,CASH (use the codes of the Classification 1s) Then group by: ISSUER This example assumes that the other securities are identified as Class 1 OTC derivative, Deposits or Other. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. Please note that this limit sums up the exposure per issuer, not issuer group, because you cannot currently define the ultimate parent for issuers of cash accounts in FA. If you have investments in multiple companies in the same issuer group in the same fund, you need to check those separately. | Value to compare against: Market Value | 0.00 / 0.00 / 0.18 / 0.20 |
Max exposure from transferable securities/money market instruments (incl. covered bonds and bonds issued or guaranteed by governments)/OTC derivatives/cash per issuer | UCITS 52.5 | Value to analyze: Absolute Exposure First group by: CLASS1 Filter the group by: OTHER,OTCDERIVATIVE,CASH,COVERED,GOVERNMENT (use the codes of the Classification 1s) Then group by: ISSUER This example assumes that the other securities are identified as Class 1 OTC derivative, Deposits or Other. Securities also need to have the Issuer field filled in. If you have a different convention for specifying such securities, change the selections accordingly; for example if you use Classification 2 to make the distinction, group by CLASS2 and type in the relevant codes under Filter the group by. Please note that this limit sums up the exposure per issuer, not issuer group, because you cannot currently define the ultimate parent for issuers of cash accounts in FA. If you have investments in multiple companies in the same issuer group in the same fund, you need to check those separately. | Value to compare against: Market Value | 0.00 / 0.00 / 0.30 / 0.35 |
Add security classifications
You need to set up your securities with the relevant categorisations in order to use the limits. Make sure that you have added the following details on all of the securities used in the fund as well as for the currencies used in the fund's accounts:
Classification 1: Define whether the security is a deposit, covered bond, government issued or guaranteed bond, a security traded on a non-regulated market, a non-UCITS fund, an OTC derivative or other.
Issuer: Define all the security issuers in FA as Contacts with type Issuer and link them to the securities using the Issuer field.
Tag No voting rights: Add the tag No voting rights to non-voting shares.
Allocation Company group: Add the ultimate parent of each issuer as Asset types in Preference → Asset classes and -types and link them to your securities from the Allocations tab in the Security window.