Look-Through Exposure
Look-through exposure is measuring a portfolio’s true underlying exposures by analyzing what’s inside funds, vehicles, and layered holdings.
Allocator relevance: Prevents hidden concentration and unintended bets—critical for risk limits, diversification, and mandate compliance.
Expanded Definition
Many allocator portfolios are multi-layered: fund-of-funds, multi-manager platforms, SPVs, and holding companies. The surface label (“private equity fund,” “multi-strat,” “venture”) often hides sector, geography, factor, and issuer concentration. Look-through exposure aims to reveal the real drivers of risk and return by mapping underlying holdings and aggregating exposures across the portfolio.
The challenge is data availability and timeliness. For private funds, look-through is often partial, lagged, or proxy-based—so confidence and lineage matter.
How It Works in Practice
Teams collect holdings data (where available), map to standardized taxonomies (sector, geography, asset type), and aggregate exposures across vehicles. They then compare to risk budgets and portfolio concentration limits and adjust pacing or rebalancing accordingly.
Decision Authority and Governance
Governance defines look-through standards: what level of transparency is required, how proxies are used, and how exposure gaps are handled. It also defines escalation when exposure breaches occur.
Common Misconceptions
- Look-through is always precise (often it’s estimated).
- If you own “diversified funds,” you’re diversified.
- Look-through is only needed for public markets.
Key Takeaways
- True exposure is often hidden in layered portfolios.
- Confidence, lineage, and update cadence matter.
- Look-through supports real diversification and compliance