SAA’s process goes beyond simply monitoring what the investment manager does and includes assistance in areas such as compliance, other than temporary impairment, stress testing, and analysis of overall and specific risk exposures, etc.
Portfolio Monitoring consists of several important components:
- Compliance Monitoring
- Investment Practices Review
- Analytical Reporting Review
- Stress & Sensitivity Testing
- Analysis of Changing Regulatory Environment
- Turnover Analysis
- Communication Process:
- Routine vs. Material Event Notification
- Troubled Credits – How does your manager’s position compare to others?
- Sub Prime Credits – How SAA is influencing the process
By fully understanding their portfolio’s credit position, and/or future risk to OTTI, they have a more accurate expectation of investment yield and total return. And, that can only improve their competitive position.