Headroom

Headroom tells a manager how much a position can grow before a limit bites. Under a 10% issuer cap, a holding at 7.5% has 2.5 points of headroom. On a £10m portfolio that is about £250,000 of further purchases, if the purchase is funded from within the portfolio.

Negative headroom means the bound has already been crossed. A holding at 12% under a 10% cap has −2 points of headroom: it must fall by 2 points to comply. Headroom shrinks without any trading when prices move or the portfolio shrinks.

Acclimetry reports headroom with its results, both to the warning bound and to the hard bound, in the rule’s unit. Example: unfunded commitments at 20% under a 25% cap have 5 points of headroom; a holding at 30% under a 25% cap has −5. See headroom and capacity and distance to a limit.