Asset classes

The Portfolio Risk team aims to maintain a solid governance process ensuring that a level of risk appropriate to return targets and market environment is maintained in all investment portfolios. This governance process is combined with providing useful risk and quantitative input to the investment process. Portfolio Risk achieves this using multi-dimensional risk analysis from a number of different risk models and approaches which ensures that risk analysis is provided in line with fund characteristics and investment styles.

The Portfolio Risk Equity Team is responsible for providing independent risk management and monitoring oversight. The team is structured around regional specialisation with dedicated Risk Analysts assigned to respective regions. The team oversees the range of long only equity fund strategies in addition to hedge funds and sophisticated retail funds. We aim to address five core questions: Are we taking the right amount of risk given the fund’s outperformance targets, are there any undue risk concentrations, are funds with similar objectives managed consistently, is the risk budget being used as intended or are there unintentional risk biases, and finally do we have confidence in the risk model output, performed via regular model backtesting.

In order to address these questions the team adopts a best of breed approach and uses a variety of risk models including APT, Barra Style Research and Finanalytica- a provider of sophisticated Fat Tailed risk modelling. To facilitate these discussions, review the analysis and highlight risk issues there is active and continual engagement with the fund managers, both via ad- hoc informal meetings as well as monthly formal governance meetings. The meetings also provide the opportunity to ensure Portfolio Risk are actively engaged and understand Managers sources of alpha, challenges and help direct the team to providing independent analysis to feed into the investment process.