Providing Robust risk management services to UCIT fund structures whilst helping to adhere to the UCITS regulatory regime.


FUND MANAGERS: Looking for an ESMA 34-39-882 compliant liquidity reporting solution?


Equity markets mostly moved sideward while they are still being supported by central banks who continue to ramp up their balance sheets. In this environment market parti…

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An interactive online platform that manages and monitors portfolio risk for a variety of UCITS/AIF fund structures and investment strategies.

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UCITS Compliant Risk Reporting

Through our risk reporting services, we enable you to monitor the compliance of your portfolios with the regulatory requirements across various European Jurisdictions; and/or adherence to user-defined risk profile. By outsourcing to Arkus, our clients can benefit by dedicating in-house investment risk resources to value-added functions, whilst be assured they are fully compliant. 

The reports are available through our online interface or delivered via e-mail. We maintain a Database of securities (including Benchmarks) and risk data and are able to run portfolios analysis on multiple risk engines. The reports are constantly updated to reflect regulatory changes. To ensure convenient monitoring of the risk profiles we provide an extensive library of guidelines on risk numbers that can be selected and adjusted individually per portfolio. Using a traffic light system the selected set of guidelines will show you at a glance if a portfolio adheres to the defined risk profile. To enable the convenient monitoring of a multitude of portfolios we provide an Exceptions Report which lists all the guidelines selected for your portfolios. We also provide an Executive Summary with the headline risk numbers and guideline results for senior management

Portfolio Level Reports

Value at Risk (VaR) – Absolute or relative 

Arkus will compute VaR on various time horizons from one day to one month at several confidence intervals, conditional VaR, VaR contributions at the position level and the daily back tests required by regulation to cover market risk. The risk numbers will be calculated using a factor model and full valuation approach in a Monte Carlo Simulation framework. Linear Volatility as well as a sub-additive decomposition of it are also available. Leverage calculated as the Sum of Notional will also be provided in conjunction with the VaR results.

If required, Arkus will make suggestions for potential mappings or set-ups of assets. A mapping report and also a report of the proxied assets (if any) is provided each time a risk report is delivered. All mapping and relevant risk information (such as DV01, CS01 etc.) are available in RiskRadar™.

Regarding structured products Arkus has a large library of pricers for derivative products which is available for risk modelling if underlying data is sufficient. We furthermore have the possibility to create non-linear derivatives on composite assets including multiple underlying instruments. This does e.g. enable us to capture optionality on bespoke indices or baskets of assets. Should none of the set-ups or current pricing functions provide an adequate fit, Arkus can develop specific pricing functions for bespoke structured products upon request.

Commitment Approach (Including netting-/hedging arrangements)

Another report we can provide is concentrating on the second measure for the Global Exposure (as per ESMA 10-788) i.e. the Leverage calculated through the Commitment approach. This report uses the prescriptions provided in the ESMA 10-788 to calculate the Commitment on derivative positions. It will include the Gross and Net Leverage as well as a breakdown of the contribution to leverage by position. Furthermore, netting and hedging effects will be shown.

Arkus will provide an extensive liquidity report to fully monitor the liquidity of the portfolio. Our liquidity reporting comprises the asset and liability side both in normal and stressed scenarios at several time horizons. Arkus will provide you with a dedicated report to monitor the liquidity profile of the portfolio. This report shall enable you to easily contrast the asset and liability side. We have developed a simple and transparnet methodology based on the metrics and data already used or calculated for the risk profile monitoring. The liquidity indicators are based on: 

  • The redemption patterns for each fund including a liquidity stress test;
  • the composition of the assets of the fund in terms of liquidity is assessed based on a multi-facotr scoring appraoch. The resulting liquidity profile is also scrutinised in a stress test. 

Asset side

The asset liquidity is assessed through a scoring approach using multiple criteria (e.g. position side, traded volume, rating, maturity, stale prices etc). The overall score per asset is aggregated and translated into liquidity buckets. The report details the individual score for each asset and each factor that is used to assess liquidity. Our system also allows the risk manager to override a liquidity score based on asset specific information. The process is followed through an audit trail. 

Liability side

Besides a graphical presentation of the net redemptions patterns their descriptive statistics are calculated at several time horizons. Furthermore, they are analysed and used in stress testing. 

Our liquidity indicators contrast the liquidity breakdown of the asset side obtained through our multi-factor scoring approach with the results of the liability analysis at matching time horizons to screen for potential liquidity shortfalls. this is conducted in multiple combinations or normal and stressed conditions of both sides.

Arkus counterparty report will show the exposures to counterparties resulting from deposits and/or PnL originating from OTC instruments. Gross and net exposures will be shown by counterparty.

Arkus concentration report enables you to monitor the concentrations in the portfolio. The report will present portfolio concentrations across several dimensions (e.g. ratings, issuers, duration, sector etc.) as well as other important information in that respect (e.g. stale prices, exposure by ultimate parents etc.).

This report will provide a breakdown of the currency exposures of your portfolios distinguishing between exposures stemming from direct investments, derivatives and FX derivatives. It will also show those instruments that have a hedging effect.

Arkus can provide bespoke investment stress tests and report on their outcome. We use a series of stress tests on risks associated with each investment position of the fund and their overall effect on the funds portfolio, including shock tests to an exhaustive list of explanatory variables. A number of standard scenarios combining various shocks are also available. These will enable managers to access and monitor the extreme risks of the fund under normal and exceptional market conditions. Customisable stress tests are available on demand. 

Customised scenarios can be defined in order to simulated: 

  • Yield curve shocks, 
  • Currency pair shocks
  • Equity and indices shocks
  • Equity and indices volatility shifts. 

To conveniently monitor the Cover Rules, we have developed a guideline at portfolio level which is based on the Coverage Ratio. Any warning or breaching limit can be specified when the Guideline is set up depending on the particularities of the portfolio. The warning level will act as a safeguard. If it is surpassed, it invites the addressee to verify the nature of the breach and potentially take corrective actions.

Fund Level Reports

This report presents the high-level reporting lists for all portfolios in the fund, the headline risk numbers, and the overall result of the guidelines check in one line per portfolio.

To enable you to easily monitor your defined set of key risk indicators Arkus provides an Exception Report which shows the results of a check on the KRIs on all the portfolios for a fund.

Arkus maintains an extensive library of guidelines on KRIs (VaR, Leverage, Concentrations, Liquidity ratios etc.) which is continuously enlarged. You can specify a warning and a breach level, and the result will be indicated through a traffic light system.

Arkus can develop a bespoke data file that can be used to feed an internal data warehouse.

Other Risk Related Services

In Accordance and in keeping to the respective European legal documents and guideline requirements, Arkus can provide the following: 

  • Daily monitoring of Pre-Trade investment restrictions (Such “Pre-Trade” service being dependent on the implementation of an on-going data-flow with investment managers and an agreed minimum data quality standard format)
  • Daily monitoring of any unofficial and/or internal investment restrictions. 
  • Support on the interpretation of legal investment restrictions and on the understanding and classification of investment breaches. 

The on-going monitoring of investment restrictions will be performed through our proprietary online-platform “RiskRadar” with breach summaries provided via the investment restrictions report, email or directly accessed via RiskRadar. Clients can also have the chance the customise the list of exchanges which should be considered as eligible for every single portfolio. In addition, Arkus enables the customisation of individual investment restrictions “warning” limits to facilitate the monitoring. These can be easily monitored by dedicated users through RiskRadar under the “investment restrictions set-up” tab.

In the investment decision process, it is important to take into account both return and risk in order to analyse which investment is more attractive than others. Portfolio performance measurements are useful in the evaluation of active portfolio management which can also help in the investment decision process by ranking the performance of funds, according to their investment strategies and risk and desirability.

The risk-adjusted ratios which are available on Risk Radar are the most common measures used in the portfolio performance analysis.

The following performance metrics are currently available on Risk Radar:

  • Ex-post Tracking Error
  • Sharpe Ratio
  • Sortino Ratio
  • Treynor Ratio
  • Jensen’s Alpha
  • Information Ratio (using Jensen Alpha)
  • Information Ratio (using Standard Alpha)

RiskRadar, our interactive Risk monitoring platform, will provide a numerical and visual breakdown of a portfolio’s performance contributions across various categories. The return contribution of price effects, foreign exchange, income distribution and fees are captured and can be analysed along multiple factors. The performance of each asset can also be traced along with its exposures.

Customisable widgets and various drop downs will enable the user to customize and interact with their portfolio’s performance characteristics. A great easy to use feature that enables its user to fully comprehend their overall funds’ performance.

Arkus will produce the SRRI reports that can be used to feed the KIID/KID  documents required for the respective fund structures. The calculation of the SRRI will be performed by Arkus on an automated basis through its in-house system RiskRadar™. This is done accounting for incomplete time-series and/or changes to the representative Asset-Mix in case of insufficient time series

A dedicated report will be issued on a weekly basis with the latest SRRI calculated which includes an assessment if it lies in the current range. In case of deviations the number of weeks outside the bucket are automatically displayed and migrations are flagged. For the flagging the migration rules as per ESMA 10-673 considering the fund types specified.

  • Market funds
  • Absolute return funds
  • Total return funds
  • Structured funds

Arkus can provide fund managers with a host of bespoke/ specific reporting solutions to their particular requirements.

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