To ensure that risk objectives are being met, we believe it’s critical that risk management operates independently from portfolio management.
Our independent Risk Management Group develops and monitors risk guidelines and risk measures, like tracking error and beta, for the entire spectrum of our investment offerings. This active risk mitigation program includes frequent and regular monitoring of assigned portfolio tolerances and deviations.
The team focuses on common risks both:
- Across asset classes (such as higher-than-expected correlations between portfolio components)
- Within asset classes (such as manager contribution to portfolio risk)
The process provides a system of checks and balances, ensuring that our portfolio managers:
- Have a clear view of the risks they are taking
- Maintain diversified portfolios designed to deliver more consistent returns over time
- Avoid the risks associated with concentrating a majority of a strategy’s assets with a limited number of managers
We build in risk management at the securities, manager, asset class and portfolio levels.
Our risk model explains the variability of individual security returns in terms of systematic risk factors – and there are more than 2,000 of them in equity, fixed income and alternatives (hedge funds, real estate and private equity). Our approach enables us to take a more integrated view of risk.