Portfolio monitoring involves the ongoing observation, analysis, and assessment of the performance, composition, and risk characteristics of an investment portfolio. It typically includes the following activities
1. Performance Tracking
- Continuously monitoring the financial performance of the portfolio, including returns, yield, and total value, over time
2. Risk Assessment
- Assessing the level of risk associated with the portfolio, including volatility, exposure to different asset classes, and sensitivity to market movements
3. Asset Allocation Review
- Reviewing the allocation of assets within the portfolio to ensure alignment with investment objectives, risk tolerance, and market conditions
4. Diversification Analysis
- Evaluating the diversification of investments within the portfolio across different asset classes, sectors, regions, and investment strategies.
5. Benchmark Comparison
- Comparing the portfolio’s performance against relevant benchmarks or peer groups to evaluate its relative performance and identify areas for improvement.
6. Investment Policy Compliance
- Ensuring that the portfolio adheres to the investment guidelines, constraints, and regulatory requirements outlined in the investment policy statement.
7. Rebalancing
- Periodically adjusting the portfolio’s asset allocation to maintain the desired risk-return profile and address any deviations from the target allocation.
8. Reporting and Communication
- Providing regular reports and updates to stakeholders, including investors, investment committees, and management, on the portfolio’s performance, strategy, and outlook.
Overall, portfolio monitoring is essential for maintaining transparency, accountability, and alignment with investment objectives, as well as for making informed decisions to optimize portfolio performance and mitigate risks.