The SRRI is a key component in risk management and illustrates a fund’s risk and reward profile through an integer number on a scale from 1 to 7. It is based on the measured volatility of performance in the last 5 years.
Efficient control and publication of the SRRI: the published value is to be calculated on the basis of the current funds’ Net Asset Value (NAV) history (conforming CESR/10-673 ) and reconciled with potential previous SRRI publications.
Methodology for the calculation
The tool is based on a mySQL or Oracle database, the import occurs via a Dynamic Logic Engine (DLE). The NAV data of the last 5 years is uploaded via email and CSV files into the RiskMan system which computes the volatility based on monthly performance with a unique and standardised algorithm.
The sliding window test determines the necessity to change and reduction of volatility of the KIID. If all new results of an asset are off the original SSRI over the course of the 4 months observation period, a new KIID needs to be generated. If the developments of the past 4 months indicate varying risk groups the asset manager has to decide on a possible modification of the SRRI.
The ad hoc computation of the SRRI can be displayed instantly, taking into consideration the latest NAV available. The report shows all calculations and flags possible deviations via a traffic light system.