What is the process of mapping private assets in Fabric?
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It depends on how many private assets that you have.
Option 1: Using your custom attributes (From your performance reporting system or Fabric’s taxonomy), you will assign risk proxies on an attribute basis.
Example: For a long/short hedge fund we will use the Hedge FundI: Long/Short Index.
Example 2: For a private equity fund, it could be a large or small buyout or early or late stage venture, etc.
Option 2: Map assets individually into the factor space.
Typically, Fabric prioritizes assets with the largest client held positions to map first.
Using a hedge fund as an example: We'll take the historical returns and what you know about the holdings and the strategy of that fund. And then that will get fed into is hedge fund model, which will then feed out factor risks based on most historical returns. And it will again be a kind of a regression analysis, but it will take into account your knowledge on things, like how much equity is the fund, how much leverage, do they take on what does the what is the strategy of the fund, etc.
Using Private Real Estate as an example: You enter what type of real estate is it, where it is located, how much leverage they’re in, what types of tenants, etc.
For private infrastructure, you take the things that are important to a private infrastructure investment like what sector it is in, and the MSCI models help you map it into factor space.
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