Asset and liability management with legal and regulatory obligations monitoring

The distribution of own and third-party funds can be:

• Identified, where the client’s data is revealed to the fund administrator – responsible to the regulatory bodies and by the shareholders (statements, income reports, suitability, etc.)

• On account and order, where the customer’s data is retained in the distributor – which becomes responsible to the regulatory bodies and the quotaholder.

The rebate amount is a benefit or a “commission” paid by the administrator or manager of a portfolio (fund, club or investment portfolio), and the calculation of this amount is based on the administration and/or management fee charged directly on the PL of that portfolio.

It is important to monitor the calculation of rebates in two views, such as expenses (administrators/managers) or revenues (distributors/officers/portfolios).

Quotaholder control services (liability controllership) of investment funds and clubs include:

bookkeeping of quotas; nominative registration of the holders of such quotas; registration of transactions and events involving such quotas; calculation and withholding of taxes; provision of information to regulatory bodies and information to quotaholders.

The control of shareholders of offshore funds comprises:

Control of umbrella funds with their various classes and series, hard and soft lockup processes, holdback, series rollup and quota disclosure controls in periodicity other than daily and monthly.

The control of shareholders of structured funds must respect some parameters:
different series, values of quotas of each series, profitability and taxation consistent with each type of fund and management of the number of shareholders, so that tax benefits are not lost.

The management of liquid funds, structured funds and investment clubs entails some ancillary obligations that have a specific flow for generating reports.

These vary depending on the destination legal, regulatory, or legal entity and the type of investment.

The comparison of assets in relation to a benchmark and/or other investment options is made by the expectation of gross profitability.

bookkeeping of quotas; nominative registration of the holders of such quotas; registration of transactions and events involving such quotas; calculation and withholding of taxes; provision of information to regulatory bodies and information to quotaholders.

In the practice of mapping investments and gross/net profitability by asset and consolidated, a managed portfolio or a consolidated portfolio is created to demonstrate the global profitability, gross and net of taxes.

From this consolidation, it is also possible to demonstrate the profitability of the incentivized securities with the gross-up to make it easier for the client to compare investment options and evaluate past performance by comparing similar conditions.

Consolidating positions and trading histories presents several challenges. By including operations in several markets and currencies, the difficulties of comparison and calculation of profitability are amplified.

Consolidation in portfolios and the simultaneous calculation of profitability in several currencies, compared to various benchmarks, can be carried out according to management needs.

Market risk is defined as the potential for a negative outcome due to changes in prices or market parameters. There are several methodologies applicable such as parametric or non-parametric value-at-risk (VaR), risk under stress conditions, diversifiable risk, etc.

The process of fund explosion – in which quotas are replaced by their equivalents in market assets – is fundamental for the correct measurement of such parameters.

Liquidity risk determines procedures for measuring the risk of a given fund:

• not be able to honour its current and future obligations without affecting its day-to-day operations; or

• Not being able to trade a particular position at market price (position size/market volume) and may incur significant losses.