Risk Management Approach
Investment performance is a function of not only return but also of the underlying risk. Risk management is essential to the entire investment process, since there is no greater risk than losing the capital invested. Therefore, not losing capital is the focus of our risk management plan.
The first step that we deploy towards proper risk management is an appropriate and adequate initial risk profiling of the client. Our risk management strategy to reduce volatility and mitigate big losses without necessarily sacrificing long-term returns. We employ a tactical asset allocation strategy as a method of preventing capital loss during falling market prices with the aim to reduce portfolio volatility. At the core of this strategy are alterations to the exposures of a portfolio’s asset classes as guided by both our quantitative risk and fundamental analysis.
The aim of this risk management approach is to maintain the desired level risk adjusted return whenever conditions affecting the latter change drastically in the economy and financial markets.
- Identify client risk profile & appetite
- Inform client about risks associated with investment within agreed mandate
- Estimate likelihood and impact of risks
- Assess risk measures (Volatility, VaR, TE, Beta etc…) both at the aggregate and factor (Market, Sector, Credit,…) levels
- Manage and diversify total risks of client’s investments
- Take actions and adopt mechanisms to minimize risk e.g limit portfolio exposure to certain risks, stop loss mechanisms, etc
Monitoring & Review
- Ensure all relevant risk guidelines, regulatory and compliance requirements are being met
- Continuously monitor sources of volatility, tracking error, expected shortfall amongst others