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Because to some extent the 'risk profile' is both aspirational and out of your hands. You can say 90% of your fund is investment grade, and S&P come in and dow
by JackFr 7y ago
Because to some extent the 'risk profile' is both aspirational and out of your hands. You can say 90% of your fund is investment grade, and S&P come in and downgrade a large holding of yours (or upgrade one).
- MR4D 7y agoI work with fund managers on a frequent basis. They all have a requirement to sell when an investment crosses certain risk boundaries (such as ratings downgrades). Sure, some funds have a "go anywhere" IPS, but ratings downgrades often causes a flurry of asset sales. If you say your holdings are 90% IG, and then after a downgrade they are only 70% IG, then you have two options: #1 - sell the downgraded assets to bring it back into compliance, or; #2, if you are within your funds stated IPS, then you have to restate the number as 70%, and have to remove all literature that references the 90% number. IG = Investment Grade IPS = Investment Policy Statement