sponsors media partners

Transcription

1

2 sponsors media partners

3 SESSION III: Funds Risk Profile Moderator: Michael Derwael, Risk Manager, Lombard Odier Funds (Europe) S.A., Luxembourg Panelists: Dr Luc Neuberg, Conducting Officer, BCEE Asset Management, Luxembourg Sacha Reverdiau, Conducting Officer & Risk Manager, Nomura - Global Funds Management S.A. Mike Sommer, Head of Risk, Franklin Templeton International Services S.à r.l.,luxembourg

4 Funds Risk Profile Moderator: FROM KEY CONSIDERATIONS TO A PRACTITIONER S GUIDE Michael Derwael, Risk Manager, Lombard Odier Funds (Europe) S.A., Luxembourg Panelists: Dr Luc Neuberg, Conducting Officer, BCEE Asset Management, Luxembourg Sacha Reverdiau, Conducting Officer & Risk Manager, Nomura - Global Funds Management S.A. Mike Sommer, Head of Risk, Franklin Templeton International Services S.à r.l., Luxembourg ALFI & ALRiM Risk Management Conference May 26 th, 2016

5 Agenda 1. Where does it come from? 2. What is it? 3. How does it work? 4. How do you use it? ALFI & ALRiM Risk Management Conference May 26 th, 2016

6 Where does it come from? Global Context Basle RiskMetrics CSSF 10/04 DIRECTIVE 2001/107/CE CSSF 12/546 CSSF 11/ SEC Markowitz Ross AIFMD Madoff CSSF 07/308? 0 ALFI & ALRiM Risk Management Conference May 26 th, 2016

7 Where does it come from? CSSF 11/512 Risk Profile DIRECTIVE 2001/107/CE Madoff CSSF 12/546 CSSF 07/308 CSSF 10/04 Reporting

8 Where does it come from? «Shall periodically disclose to investors the current risk profile of the AIF and the risk management systems employed to manage those risks AIFMD level 1 - Article 23-4-c The risk profile disclosure shall outline (a) the measures to assess the sensitivity of the AIF to the most relevant risks it is exposed (b) a description of the circumstances and remedial measures if limits exceeded (or likely to be exceeded) AIFMD level 2 - Article Board of Directors «Should approve the risk profile» CSSF 11/512 Circular (III.2.)]»< «Should advise the Board on the definition of the risk profile» CSSF 11/512 Circular (III.2.) «Shall advise the Board of Directors on identification of the risk profile and reports to the Board the consistency between the current levels of risk and the risk profile» CSSF règlement N 10-4 Article 13.3 Investors The AIFM shall provide to the CSSF the current risk profile including: (i) the market risk profile (including the expected return and volatility of the AIF in normal market conditions) (ii) the liquidity profile of the investments of the AIF AIFMD level 2 - Article 110-d-i Risk Management Function Regulator «Shall assess the risk profile for each UCITS on the basis of the investment policy and strategy (including the use made of Financial Derivatives Instruments)» CSSF 11/512 Circular (III.4.1) «Shall monitor and control consistency between the current levels of risk incurred by UCITS and the risk profile of the UCITS» CSSF 11/512 Circular (III.2.) «Shall set a maximum VaR limit for each UCITS in accordance with the risk profile» CSSF 11/512 Circular (III.4.4) «Shall measure and manage UCITS risks and ensure compliance with limits» CSSF règlement N Article 45.1 «Monitors consistence of the risk profile with the limits» AIFMD Level 2 Article 39.1

9 What is it? Global Context Audience : Number of Funds UCITS AIF SIF 157 AuM Profile : e P( t) lim n e n 2 t 2 0 n!! n dt 2 log7 n i k0 e 2 3dt 6 t 1 SRRI 4k 14 k 3 3 dt A written description that provides information about someone or something. 2 S Ln( ) ( r y ) t X 2 t tdt e 4k 1 4k3 ALFI & ALRiM Risk Management Conference May 26 th, 2016 e t e t VaR i k0 k 1

10 Questions - Who has a risk profile? - Do you draw up sub-fund specific risk profiles? - Do you formalize systematically each subfund s risk profile? - Do your BoDs validate these? Before launch? ALFI & ALRiM Risk Management Conference May 26 th, 2016

11 What is it? New approach No more standing groups Pool of experts + Steering Committee Taskforce approach driven by one expert and one member of the steering committee Groups are constituted for a given topic and then disbanded Aims: more reactivity more grassroots activism Risk profile taskforce brief Notion embedded in most recent pieces of regulation Framed as a tool used for: defining risks borne testing adequacy of risk frameworks communicating with stakeholders. Despite its omnipresence, list of aspects to be covered and importance of it, the risk profile is not explicitly defined. Our aims: put forward a workable definition build guidelines on processes to elaborate a risk profile explain how to put it at the centre of risk management keep it workable for both financial and real asset funds

12 What is it? A risk profile is the result of risk profiling. Risk profiling is the process by which the risk manager ensures the identification and assessment of risks that may have a material impact on the fund s performance. The risk profile needs to be aligned with the risk appetite.

13 Identification Formally acknowledging the existence of risk factors is akin to drawing up the cartography of risks. Assessment Some risks are easily measurable because well-known/understood, data is readily available or measurement methods standardized. Which doesn t mean the other risk factors should be disregarded: they need to be assessed whether with clear-cut measures or expert-judgement (which may translate into a grading/rating system). Potential risks The risks that should be considered are those borne and those that could materialize and materially influence the fund s performance. This is closely linked to the probability of occurrence. Material impact An impact such that the business plan, the investment thesis, the investment objectives, the risk and/or return targets may be called into question or are not relevant anymore. This is akin to the concept of severity. Fund performance Performance includes returns delivered to the investor but also other modalities such as e.g. capital availability.

14 How does it work? Starting point Key questions For real assets Business plan incl. Investment strategy implementation Scenarii play out For financial assets Prospectus Investment objectives, policy & process Authorized instruments Risk & return targets Model portfolio What realistic scenario are (likely to be) driving returns? What are the impacts of changing scenario? What are the assumptions underlying the investment thesis?

15 How does it work?

16 Questions - How do you use the risk profile? - How else could you or do you intend to use the risk profile? ALFI & ALRiM Risk Management Conference May 26 th, 2016

17 How to use it? Risk Profile(s) Risk Mgt Process Gap Analysis

18 Questions - How do you cope with the challenges linked to materializing and keeping up to date the risk profile analysis? ALFI & ALRiM Risk Management Conference May 26 th, 2016

19 Questions - Who are the users of the risk profile? - Do you adapt the extent of the risk profile disclosure according to the target audience or intended use? - How do you reconcile or contrast that variety of disclosure? ALFI & ALRiM Risk Management Conference May 26 th, 2016

20 Questions - What challenges have you been facing when setting up and using the risk profile analysis? ALFI & ALRiM Risk Management Conference May 26 th, 2016

21 Questions - What lies ahead of us? ALFI & ALRiM Risk Management Conference May 26 th, 2016

22 Closing Thoughts ALFI & ALRiM Risk Management Conference May 26 th, 2016

23 Thank you for your attention Michael Derwael, Risk Manager, Lombard Odier Funds (Europe) S.A., Luxembourg Dr Luc Neuberg, Conducting Officer, BCEE Asset Management, Luxembourg Sacha Reverdiau, Conducting Officer & Risk Manager, Nomura - Global Funds Management S.A. Mike Sommer, Head of Risk, Franklin Templeton International Services S.à r.l., Luxembourg ALFI & ALRiM Risk Management Conference May 26 th, 2016

24 sponsors media partners