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At first glance, the Synthetic Risk and Reward Indicator (SRRI) appears to be based on a simple volatility calculation to be published in the Key Investor Information document required by UCITS IV.
Further analysis reveals that the SRRI is a more complex matter. It has implications on:
- the risk profile and Risk Management Process of funds and management companies;
- the portfolio management done by asset managers;
- the product management and development functions, and
- the distribution network.
The SRRI needs to be adequately documented and integrated into the formal Risk Management Process of a fund. It also needs to be permanently monitored against internal limits and alerts, so as to...
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