Policy clause
"No more than 20% in private markets": how to write it, test it and evidence it
A private-markets cap limits the share of the portfolio in unlisted funds and assets. Testing it needs one classification group for everything the policy calls private, and a view on stale valuations. Acclimetry holds it as an allocation-range band; commitments not yet drawn are measured separately with the commitment limit.
Private market investments may not exceed 20% of the total portfolio.
allocation_rangeQuestions to settle before it can be tested
- What is private: private equity, private credit, infrastructure, property funds, evergreen funds? All of them must share one group at the band's classification level.
- Valuation lag: private funds often report quarterly, so a fall in listed markets raises their weight without any purchase.
- Commitments: is undrawn capital part of the 20%? Market value excludes it, so test it with a commitment limit.
- Denominator: the total portfolio including cash, at the latest available valuations.
As a testable rule
Allocation-range template, dimension class, one band: Private markets, hard maximum 20%, warning maximum 18%. The weight is the group's market value over the net market value of the measured positions. A holding left unvalued, for instance through a stale price, makes the result not evaluated rather than reading an old value.
A testable wording
Holdings classed Private markets may not exceed 20% of the portfolio's market value. The class covers private equity, private credit and infrastructure funds at their latest reported valuations. Undrawn commitments are limited separately.
See the commitment limit and unfunded commitments.
Worked example
Three private funds at their last reported values are 11.25m of the 50m portfolio, 22.5%, over the cap after listed markets fell.
Rule template:allocation_range dimension: classbands: group=Private markets, hardMax=20, warnMax=18
| Holding | Class | Market value |
|---|---|---|
| Global equities | Equities | 24,000,000 |
| Bonds | Bonds | 12,500,000 |
| Private equity fund I | Private markets | 5,600,000 |
| Private credit fund II | Private markets | 3,200,000 |
| Infrastructure fund III | Private markets | 2,450,000 |
| Cash | Cash | 2,250,000 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Private markets | Breach | 22.5% | ≤ 20% warning ≤ 18% | -2.5% -4.5% to warning | ABOVE_HARD_MAXIMUM |
ABOVE_HARD_MAXIMUM: The measured value exceeds the approved hard maximum, beyond any stated tolerance.
Largest contributors: Private markets → Private equity fund I 11.2%, Private credit fund II 6.4%, Infrastructure fund III 4.9%
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 private-markets weight, its state, headroom and the funds as contributors. A breach opens a case whose root cause can record valuation change or market movement, separating the denominator effect from a new commitment. Closing the case can wait for a stated number of compliant observations.