Policy clause
"Top 10 holdings no more than 40%": how to write it, test it and evidence it
A top-ten cap limits concentration in the largest holdings together, catching a portfolio that respects every single-issuer limit yet leans on a few names. It becomes testable once the policy says what a holding is and what is excluded. Acclimetry's diversification template sums the ten largest measured weights against the whole portfolio's value.
The ten largest holdings may not exceed 40% of the portfolio.
diversificationQuestions to settle before it can be tested
- Holding or issuer: the template ranks holdings, so a company's bond and shares rank separately; a top-ten-issuers reading is not available.
- Exclusions: pooled funds, government bonds and cash are often excluded. Exempt classes leave the ranking but stay in the denominator.
- Fewer than ten: with fewer than ten measured holdings, the top ten are all of them.
- Weights: absolute market value over the whole portfolio's value, so a short ranks by its size.
As a testable rule
Diversification template, measure maximum top-N weight, N = 10, with Collective funds and Cash exempt. The ten largest absolute weights are summed over the portfolio's net market value: hard maximum 40%, warning maximum 37.5%. A missing value makes the result not evaluated, because an unvalued holding could rank in the top ten.
A testable wording
The ten largest direct holdings, excluding collective funds and cash, may not together exceed 40% of the portfolio's market value.
See minimum diversification and headroom; a single-name cap is the 5% issuer limit.
Worked example
With the index fund and cash exempt, the six direct holdings are the top ten: 38% of the 6m portfolio, past the 37.5% warning.
Rule template:diversification measure: max_top_n_weighttopN: 10exemptClassNames: Collective funds, Cash
Bounds: warn max 37.5% · hard max 40%
| Holding | Class | Market value |
|---|---|---|
| Global equity index fund | Collective funds | 3,500,000 |
| Cash | Cash | 220,000 |
| Acme plc ordinary shares | Equities | 520,000 |
| Northwind Energy plc ordinary shares | Equities | 480,000 |
| Lumen Telecom plc ordinary shares | Equities | 420,000 |
| Kestrel Utilities plc ordinary shares | Equities | 360,000 |
| Orchard Foods plc ordinary shares | Equities | 300,000 |
| Granite Insurance plc ordinary shares | Equities | 200,000 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Top 10 holdings | Warning | 38% | ≤ 40% warning ≤ 37.5% | 2% -0.5% to warning | ABOVE_WARNING_MAXIMUM |
ABOVE_WARNING_MAXIMUM: The measured value has crossed the early-warning maximum but not the hard limit.
Largest contributors: Top 10 holdings → Acme plc ordinary shares 8.67%, Northwind Energy plc ordinary shares 8%, Lumen Telecom plc ordinary shares 7%
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 combined weight, its state and headroom, and the ranked holdings as contributors. A breach opens a case that records whether a trade or market movement caused it. Past results can be reproduced from the stored inputs.