Portfolio management is a set of strategic decisions that guide investors, by selecting the best available financial assets that will provide the expected rate of return for any given degree of risk, as well as mitigate (reduce) risk. The objectives of portfolio management are applicable to all financial portfolios, e.g.: investment safety or minimization of risk,stability of returns,capital growth, liquidity, etc. If taken into account, these objectives result in a proper analytical approach towards portfolio growth. The following steps are applicable:
Provides means to define different strategies for scenario changes in the market environment in order to compose real world scenarios, such as crisis, growth, market shocks, issuer defaults, refinancing costs, etc.
Performs the optimisation of risk and return, and presents proposals for portfolio restructuring in the presence of different scenarios, user defined restrictions and preferences. For example, investments in EUR > 30% and investments in USD < 40%.
Enables the grouping of positions according to different parameters and compares specific aggregates against target limits. This enables continuous tracking of the portfolio’s current state and alerts in case of broken limits. A limit example: all positions in EUR must have a present value that is below 5 Mio. EUR and the three biggest positions in USD should not allocate more than 30% of the total investments in USD.
Position and portfolio performance is calculated for a specific historical period and includes transactions. The performance is separated into realised, non-realised and FX-effects, which are aggregated along the sub-portfolio hierarchy. In addition, performances can be tracked against multi-level benchmark.
The functionality is ensured via the following modules and models:
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The Portfolio Management Module inherits the features of Risk Framework Interfaces and Connectors and Risk Engine Interfaces and Connectors.