Global Risk & Performance

Global Risk BBVA Asset Management

The quality of risk management is one of the identifying traits of BBVA Asset Management and, therefore, a core priority for its actions. The combination of prudent risk management, along with the use of advanced management techniques, has proven to be decisive in obtaining returns and, in short, in creating value for the participants and shareholders of the collective investment institutions and pension funds managed by the different companies making up this unit.

The main goal of Global Risk Asset Management is to ensure that the significant risks that affect the collective investment institutions and pension funds managed by the companies to which service is provided have been duly identified, evaluated and quantified, and that the appropriate control systems have been implemented to mitigate them. Of these we must emphasize market risk, credit risk, counterparty risk, liquidation risk and liquidity risk, where there is a large number of qualified personnel to identify and control them, with extensive experience and knowledge and the necessary tools.

Management risk is based on four fundamental mainstays:

Global Risk

Independence:

Risk areas are separated from operating units so that risk management activities are conducted with enough independence and autonomy to suitably control risks.

Customer service:

The risk areas generate quality information that lets investments be made according to the investment strategies, targets and risk profile of the collective investment institution or pension fund in question. Thus, a thorough, transparent and independent risk process is shaped as a crucial factor to guarantee suitable management of the commitments taken on with customers and regular reporting on their quality investments.

Systematic and permanent control:

On a daily basis, the pertinent risk areas supervise, measure and manage the risks inherent to the collective investment institutions and pension funds managed by the different BBVA Asset Management companies. The management and control systems for different risks comply with the most demanding criteria and employ the best practices in the industry.

Global reach:

The homogeneous application by all BBVA Asset Management companies, regardless of their geographic location, of the principals and criteria considered basic for suitable risk management, respecting the regulatory requirements in force in every country, is considered a crucial factor and, to this end, have employed all necessary resources and technology.

This objective requires permanent updating of the regulations applicable to risk management in the different regions where BBVA Asset Management companies are present, of the general risk policies and methodologies and of the best practices of the financial industry for asset management, with a target to constantly improve and move forward.

Performance

The main purpose of the Global Performance Department is to ensure integrity and accuracy in measuring the investment results of collective investment institutions, pension funds and portfolios managed by the different BBVA Asset Management companies. For this reason, it is responsible for:

  • Defining the criteria and methodologies to use, making these measurements and distributing information. The most relevant measurement and analysis methods are Performance versus Benchmark, Performance versus Peers and Performance Attribution.
  • Ensuring definition according to the standards and correctness of benchmark data, keeping information on them, reconciling index returns with those obtained by their baskets and analyzing their suitability.

This unit is also in charge of ensuring compliance with GIPS (international ethics standards for objective measurement and transparent and complete reporting of information on the investment performance of companies, which are accepted in more than 30 countries), where it is responsible for drafting the reports, implementing the methodologies and procedures to comply with them, documentary management and relations with the compliance verifier.

Best Practices

Convinced of the advantages of complying with best practices, we have been pioneers in adopting Global Investment Performance Standards (GIPS) in Spain, presenting the results of the investment funds and pension funds managed by the companies in BBVA Asset Management, in complying with this regulation since 2002.

In April 1999, AIMR® (Association of Investment Management and Research, currently the CFA Institute) published GIPS standards for the first time. In January 2010, the revised standards were adopted, reflecting the joint cooperation of 35 country sponsors that help to develop and promote the adoption of GIPS standards. This latest version is an update of the 2005 edition, the second review since their introduction in 1999.

Compliance with GIPS standards improves the level of investors' confidence because they know that the information on yields is a fair and true representation of actual results.

GIPS standards are self-regulation ethics standards for the truthful and complete reporting of information on investment yields that require fund management companies to report at least 5 years of historic yields, or, if they have existed for less time, since the creation of the company or the strategy.

GIPS standards establish a series of requirements and recommendations, in which commonly accepted principles and criteria are defined with regard to source data, account grouping criteria based on common investment strategies (aggregated), accepted yield calculation methods, as well as minimal information comprised of the yield log, and other relevant information to include for suitable understanding of the risks for current customers or potential investors.

GIPS standards consist of a series of requirements that companies must follow in order to declare their compliance, as well as freely-adopted recommendations. Achieving the objective of presenting complete, reliable and relevant information requires compliance not only with the minimum requirements.

In accordance with our commitment to excellence and transparency, at BBVA Asset Management we have adopted the majority of GIPS recommendations and we are committed to adopting more recommendations insofar as it is relevant to our customers and potential investors.

Report GIPS BBVA Asset Management, December 2017 Esp

Report GIPS BBVA Asset Management, December 2017 Eng