Policy clause
"No more than 15% in illiquid assets": how to write it, test it and evidence it
An illiquidity cap limits the share of the portfolio that cannot be sold readily. The test depends on an approved definition of illiquid: a classification, a days-to-sell threshold, a lock-up or a notice period. Acclimetry's liquidity profile template measures the weight that fails the chosen test and never assumes a holding is liquid.
Illiquid assets may not exceed 15% of the portfolio.
liquidity_profileQuestions to settle before it can be tested
- What is illiquid: a classification, more than 90 days to sell, a lock-up or a gate? The rule reads one approved basis, so the policy should name it.
- Valuation lag: private assets carried at their last reported value can rise above 15% when listed markets fall, without any purchase.
- Commitments: an uncalled commitment is not in market value, so it needs its own limit.
- Semi-liquid funds: monthly or quarterly dealing funds sit in between; the classification must say where.
As a testable rule
Liquidity profile template, basis liquidity classification, field LIQUIDITY_CLASS, with Illiquid the value counted. Hard maximum 15%, warning maximum 13%, over the measured positions. A holding with no classification is a data gap and reads not evaluated, never liquid.
A testable wording
Holdings classed Illiquid in the approved liquidity classification, at their latest valuation, may not exceed 15% of the portfolio's market value. Funds dealing monthly or less often are classed Semi-liquid unless locked up.
See the illiquid assets limit and lock-up and notice period.
Worked example
Three holdings classed Illiquid total 1.98m of the 12m portfolio, 16.5%, over the cap; the Semi-liquid monthly fund does not count.
Rule template:liquidity_profile basis: classificationfieldCode: LIQUIDITY_CLASSilliquidValues: IlliquidclassificationSource: field
Bounds: warn max 13% · hard max 15%
| Holding | Class | Market value | LIQUIDITY_CLASS |
|---|---|---|---|
| Global equity fund | Equities | 5,400,000 | Liquid |
| UK Treasury 4% 2030 | Government bonds | 2,600,000 | Liquid |
| Cash | Cash | 420,000 | Liquid |
| Absolute return fund, monthly dealing | Hedge funds | 1,600,000 | Semi-liquid |
| Private equity fund I | Private equity | 1,100,000 | Illiquid |
| Infrastructure fund | Infrastructure | 520,000 | Illiquid |
| Property limited partnership | Property | 360,000 | Illiquid |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Illiquid by liquidity classification | Breach | 16.5% | ≤ 15% warning ≤ 13% | -1.5% -3.5% to warning | ABOVE_HARD_MAXIMUM |
ABOVE_HARD_MAXIMUM: The measured value exceeds the approved hard maximum, beyond any stated tolerance.
Largest contributors: Illiquid by liquidity classification → Private equity fund I 9.17%, Infrastructure fund 4.33%, Property limited partnership 3%
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 illiquid weight, its state, headroom and the illiquid holdings, with the basis and field it read. A breach opens a case whose root cause can record a valuation change or market movement. Reclassifications arrive as new reference data, and stored results keep the classification they ran on.