Policy clause
"Borrowing only as a temporary overdraft up to 10%": how to write it, test it and evidence it
A borrowing clause usually sets two conditions: a size, such as 10% of the portfolio, and a nature, temporary and for liquidity only. Acclimetry measures the size as the sum of negative cash balances over net value. The temporary condition is not in the position data, so it becomes an attested obligation.
Borrowing is permitted only on a temporary basis, by way of overdraft, and may not exceed 10% of the portfolio's value.
leverage_limitQuestions to settle before it can be tested
- Temporary: how long? Thirty days, until settlement, or one month in any twelve? The duration is attested, not measured.
- Gross or net cash: does a sterling balance offset a dollar overdraft? The borrowing ratio sums negative balances and nets nothing.
- Value: gross assets or net value after the borrowing? Acclimetry divides by net market value.
- Other borrowing: repo and the leverage inside derivatives are not overdrafts and need their own limits.
As a testable rule
Leverage and borrowing template, methodology borrowing ratio, cash class Cash: negative balances in that class over the portfolio's net market value. Hard maximum 10%, warning maximum 8%. A manual obligation, attested monthly, covers the temporary condition.
A testable wording
The portfolio may borrow only by overdraft, to meet settlements or redemptions. Negative cash balances, not offset by positive ones, may not exceed 10% of net asset value. No overdraft may last more than 30 days.
See leverage methodologies for other measures and attestations for the obligation.
Worked example
A 525,000 dollar overdraft is 10.5% of the 5m net value, over the cap, though 100,000 of sterling cash sits beside it.
Rule template:leverage_limit methodology: borrowing_ratiocashClassNames: Cash
Bounds: warn max 8% · hard max 10%
| Holding | Class | Currency | Market value |
|---|---|---|---|
| Equities | Equities | – | 3,250,000 |
| Bonds | Bonds | – | 2,175,000 |
| Sterling cash account | Cash | GBP | 100,000 |
| Dollar cash account, overdrawn | Cash | USD | -525,000 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Borrowing | Breach | 10.5% | ≤ 10% warning ≤ 8% | -0.5% -2.5% to warning | ABOVE_HARD_MAXIMUM |
ABOVE_HARD_MAXIMUM: The measured value exceeds the approved hard maximum, beyond any stated tolerance.
Largest contributors: Borrowing → Dollar cash account, overdrawn 10.5%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
What each monitoring run records
Each run stores the borrowing ratio, its state, headroom and the overdrawn accounts as contributors. The monthly attestation records the manager's answer and any supporting statement. Either one failing opens a case.