{"id":90587,"date":"2025-12-25T14:10:05","date_gmt":"2025-12-25T14:10:05","guid":{"rendered":"https:\/\/awap.ch\/?p=90587"},"modified":"2026-04-14T14:15:46","modified_gmt":"2026-04-14T14:15:46","slug":"portfolio-risks","status":"publish","type":"post","link":"https:\/\/awap.ch\/en\/portfolio-risks\/","title":{"rendered":"Portfolio Risks"},"content":{"rendered":"<h1><strong>Portfolio Risks: Moving Towards Enhanced Client Disclosure<\/strong><\/h1>\n<p>As part of their mandate, External Asset Managers (EAM) must ensure they remain aligned with their client&#8217;s investor profile\u2014this is the principle of <strong>&#8220;Suitability.&#8221;<\/strong> However, managing <strong>portfolio risks<\/strong> is equally critical. IAMs manage these risks with the primary goal of generating long-term capital gains for their clients.<\/p>\n<p>Nevertheless, <strong>FINMA<\/strong> reminds managers in its <strong>Circular Fidleg 25\/2<\/strong> (LSFin) that they must <strong>protect<\/strong> their clientele by informing them as early as possible of the following specific risks:<\/p>\n<ul>\n<li><strong>Portfolio Risks:<\/strong> Clearly explain the risks associated with <strong>concentration<\/strong> in individual securities or specific <strong>issuers<\/strong>.<\/li>\n<li><strong>Knowledge and Experience:<\/strong> Test the client\u2019s understanding when they are exposed to <strong>complex, illiquid, or high-risk<\/strong> products and strategies, unlike traditional mandates where such testing may not be strictly required.<\/li>\n<li><strong>Retrocessions:<\/strong> Prominently highlight <strong>third-party compensation<\/strong> (from banks, funds, or structured products) through visible formatting, such as bold text, larger font sizes, or dedicated sidebars.<\/li>\n<li><strong>Conflicts of Interest:<\/strong> While charging fees at multiple levels (both for the mandate and the instrument, typically an AMC) remains possible, the impact must be <strong>quantifiable<\/strong> and communicated clearly. The alternative\u2014and FINMA\u2019s preferred approach\u2014is to <strong>offset<\/strong> these fees by excluding the product from billing, thereby eliminating double compensation.<\/li>\n<\/ul>\n<p>These now-formalized requirements must be <strong>implemented and verified by auditors starting in 2025<\/strong>. Managers practicing <strong>diversified and traditional<\/strong> management are already largely compliant. However, those adopting a <strong>concentrated<\/strong> (or &#8220;conviction-based&#8221;) approach, utilizing <strong>leverage<\/strong>, or resorting to <strong>illiquid assets<\/strong> must update their mandates without delay and provide specific disclosures to the affected clients.<\/p>\n<h1><strong>Monitoring Sanctions and Embargoes<\/strong><\/h1>\n<p>In a communication dated August 6, 2025, <strong>AOOS<\/strong> informed the IAM community of FINMA&#8217;s latest expectations regarding sanctions. Managers should be capable, within <strong>24 hours<\/strong> of consulting publicly available sanction lists, of detecting whether a new and\/or existing business relationship is subject to sanctions or embargoes.<\/p>\n<p>The <strong>principle of proportionality<\/strong> should allow these obligations to be adapted according to the IAM&#8217;s risk profile. Must a firm whose clientele is essentially European or Latin American really conduct an <strong>exhaustive global screening<\/strong>? Especially within such short timeframes?<\/p>\n<p>Some actors with high exposure to these risks have already implemented automated processes or rely on daily monitoring through our services. For others, a preliminary strategic review is necessary before acting. In any case, this new requirement marks a further step toward the necessity for IAMs to equip themselves with a <strong>CRM\/PMS<\/strong> capable of integrating and centralizing numerous regulatory constraints.<\/p>\n<p><strong>Sergio Uldry<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Portfolio Risks: Moving Towards Enhanced Client Disclosure As part of their mandate, External Asset Managers (EAM) must ensure they remain aligned with their client&#8217;s investor profile\u2014this is the principle of &#8220;Suitability.&#8221; However, managing portfolio risks is equally critical. IAMs manage these risks with the primary goal of generating long-term capital gains for their clients. Nevertheless, [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":90523,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-90587","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-non-categorise"],"_links":{"self":[{"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/posts\/90587","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/comments?post=90587"}],"version-history":[{"count":1,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/posts\/90587\/revisions"}],"predecessor-version":[{"id":90588,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/posts\/90587\/revisions\/90588"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/media\/90523"}],"wp:attachment":[{"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/media?parent=90587"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/categories?post=90587"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/awap.ch\/en\/wp-json\/wp\/v2\/tags?post=90587"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}