SD-07.5 — Look-Through Exposure Analysis

Business Domain: BD-07 Investment Risk (Middle office) · Applies: BOTH

Purpose

Decomposes the portfolio’s fund and pooled holdings into their underlying constituents, so risk is measured against true exposure rather than fund labels. An institution that holds ETFs, mutual funds, fund-of-funds, multi-manager portfolios and derivatives cannot see its real single-name, sector or factor exposure from the vehicle names alone — it must look through each layer to the underlying assets. For a fund-investing institution, true risk only exists at look-through; this Service Domain is the input mechanism the concentration and risk measurement runs on.

Service Operations

• Decompose pooled vehicles — recursively look through ETFs, mutual funds, fund-of-funds, multi-manager portfolios, derivatives and structured products to their underlying constituents.
• Aggregate look-through exposure — combine the direct and the indirect (fund-held) exposure to each issuer, sector and factor into a single true-exposure picture.
• Detect holdings overlap — find the same underlying held through several vehicles.
• Roll up nested exposure — handle the recursive case where a fund holds funds.
• Apply look-through thresholds — the regulatory look-through disclosure thresholds.

Inputs and outputs

• Inputs: the holdings registers of the pooled vehicles, the fund constituent data, the derivative underliers.
• Outputs: the look-through holdings and the aggregated true exposure — consumed by SD-07.4 Concentration & Exposure Risk (the measurement layer) and the other risk Service Domains.

Entities

• Consumes: Holding / Position (E-04, book = ibor for intraday measures, book = abor for period-end), Fund Investment (PM-09), Fund & Vehicle (PM-01), the derivatives entities.
• Owns: none — the look-through holdings are an analytical artefact.

Standards

• No single external standard governs look-through; the GAAP look-through disclosure thresholds and the fund-data standards (e.g. openfunds) are the references. Look-through depends on the availability of fund constituent data, which BD-13 sources.

Open extensions

• The boundary with SD-03.6 GP & Manager Monitoring — SD-03.6 monitors one manager’s holdings as oversight; SD-07.5 aggregates look-through exposure across the whole book for firm-wide risk.
• The data dependency on BD-13 for fund constituent data.