Modelling at the fund's real frequency

Most private-market risk systems model annually. It is rarely a stated design decision — it happens by default, because deal models tend to be built on yearly projections, and because every step down in period size multiplies the cost of simulation. The result is a quiet constraint that shapes everything downstream: whatever happens inside the year is invisible.

Funds do not live annually. Reporting is quarterly. Pacing decisions, covenant pressure, refinancing windows, and IC calendars all move at quarterly or monthly rhythm. And the public side of the book — the side TPA insists on comparing against — moves daily. An annual grid forces a choice between mangling the timing or ignoring it.

What annual-only hides

Three examples we kept running into:

• Within-year drawdowns. A path that dips hard in Q2 and recovers by Q4 looks flat on an annual grid. Downside statistics computed annually systematically understate what the fund actually lives through.
• Timing of stress. Covenant headroom, interest coverage, and liquidity needs are questions about when, not just whether. A yearly snapshot answers the wrong question.
• Mixed books. The moment one deal reports quarterly, an annual-only system faces a bad menu: exclude the deal, coarsen it, or break the roll-up.

What we changed

Over the past two quarters we extended the platform to run quarterly and monthly end to end — not as a display option, but through the whole chain. Macro history is ingested at its native frequency, simulations run at the frequency you choose, and each deal is modelled at its own reporting frequency. Return and risk statistics respect the grid they are computed on: a quarterly IRR is a quarterly IRR, not an annual number divided by four.

Mixed books roll up coherently. A quarterly deal no longer has to pretend it is an annual one, and one quarterly deal no longer breaks the total-fund view. That last part matters more than it sounds: frequency support is only real if the fund can be mixed-frequency, because real books always are.

Why we did it

Two reasons. First, fidelity: the risks funds care most about — drawdowns, liquidity crunches, covenant pressure — are timing risks, and timing risk lives below the annual grid. Second, the Total Portfolio Approach: comparing private deals against listed holdings on one basis requires a grid fine enough to be honest to both.

The fund no longer has to model annually. If you would like to see what your own book looks like at its real frequency, request a demo.