Risk measurement methodology development for a credit FIA

caso misurazione rischio fia di credito

Asset management company with 8 billion in real estate and securities assets under management

The Risk Management Function requested the support of MACFIN to design and implement the risk management framework of an Alternative Investment Fund (AIF) aimed at the purchase of notes of a securitization vehicle to which a multi-originator loan portfolio with underlying real estate classified among probable defaults (so-called “UtP – Unlikely to Pay”) was contributed.




Define a risk measurement methodology

for credit FIAs with underlying real estate

Support the RM Function

in interlocuting with business structures and other stakeholders (e.g., servicer) to define the functional information set for conducting analyses


of the reporting system toward toward corporate bodies


Acquisition and analysis

of available information on the characteristics/profile of the Investment Fund and the exposures being invested in (technical form, status of the real estate initiative, collateral, size of investments, any pending recovery actions)

Identification of risk indicators

for each applicable risk class and definition of methodologies for calculation/valuation of these indicators

Setting up a scoring model

to be applied to positions based on the values assigned to individual indicators, aimed at associating each exposure with a risk class

Definition of stress levels

on expected cash flows for each position according to the assigned risk class and recalculation of IRR

Implementation of a tool

for collecting the necessary information for indicator enhancement, score and risk class calculation, stress application and IRR recalculation

Design of reporting

and initial feeding for Corporate Bodies


Release of a tool

for conducting follow-up surveys independently (still in use after more than 4 years)

To foster an integrated view of the risks

(in TOP-DOWN logic) of the AIF and the effects on expected profitability by comparing basic IRR and IRR@risk

Optimization of the risk reporting process

with considerable reduction in reporting production time and exposure to operational risks (i.e., material errors, duplication of databases)


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