The guidelines, which were under review for more than 18 months, include introducing more independent reviews and subjecting portfolios to regular scenario and stress tests.
IMAS also noted that in-house risk models should be independently validated and that the governance of risk should be independent of a fund house’s investment function.
“Investment managers manage and take on investment risk on the behalf of their clients to generate returns. So it is critical that they are able to measure, analyse and manage the risk and return of their products,” Trevor Persuad, chairman of IMAS, said.
Persuad pointed out that in reality, many of the structures, systems and processes in place have grown organically over time or in response to global regulation. He noted that this development has resulted in significant variances in how risk management and portfolio analysis functions operate.
“It’s very difficult for a retail investor to get into the detail of whether an investment management firm is well run, making sure that it’s monitoring its own risk and performance correctly.
"So [the retail investor] is among the leading group of stakeholders who would benefit from this type of active debate,” Persuad noted.
Andrew Chia, Standard Chartered Bank's global head of managed investments, said: "Our due diligence process for fund managers already incorporates most, if not all, of these processes highlighted in the guidelines, thus we are very supportive of these new guidelines from IMAS."