Risk Management

Risk Management

The Risk Management team monitors and manages market, liquidity, model and funding risk exposures of firm-managed investments. The team performs a wide range of primary and macro-driven research, including stress-testing, scenario analysis, and hedging methodologies. The team works closely with the firm’s portfolio managers covering macro, equity, credit and derivatives markets in order to holistically manage the firm’s risks.

Stock Selection and Risk Management

Selecting stocks

Our managers steep themselves in their markets through internal and external research, conversations, conferences, meetings with analysts, economists, industry experts and with the management of companies.

We run an internal risk management system that stores all this information and analysis, and makes it readily available to our fund managers.

Some of our fund managers also use proprietary stock-screening systems, which narrow down the number of stocks to be examined in more detail. These screens allow our fund managers to concentrate their time, knowledge and skills on the most promising investments.

We believe that, whatever markets are doing, opportunities for above average returns are available for active managers. In practice this means that we only buy a share if we believe that it is undervalued, and not because it represents a significant proportion of the index. We are benchmark-aware, not benchmark-driven.

The result is ‘high conviction’ portfolios, constructed to meet, or even to exceed, our clients’ expectations. Our portfolios quite frequently have a ‘look and feel’ which is markedly different from those of our competitors and of the relevant benchmark.

Managing Risk

We encourage our fund managers to pursue outperformance through active fund management. At stock, sector and overall portfolio levels, we monitor and assess risk regularly. Drawing on the daily data generated by our Performance and Investment Risk teams, our fund managers monitor risk each day. But they do so in the context of our policy for managing risk.

We have a Risk and Compliance function within our management team.

• All our fund managers are aware of the risks in their portfolios, and work in close parallel with our investment committee. It meets quarterly, and as required, to evaluate risk across each of our funds.
• Another check and balance are our Risk and Compliance Committee. It meets monthly, and as required.
• Risk is also a central concern of our chief investment officer and, ultimately, of our senior partners. Both can discuss risk with a fund manager, who may then be asked to adjust a portfolio accordingly.
• The security of our clients’ money takes precedence over everything. So, we select carefully the brokers, counterparties and trustees we use, and then we oversee these relationships thoroughly.