At its most basic, investing is an exercise in taking risk and, therefore, having a firm grasp on risk management is essential. In our work with some of the largest investors globally we have found that having and overarching framework for allocating and monitoring risk can often make the difference between investment success and failure.
Fundamental to our approach is diversification across both financial and non-financial assets and within financial assets across sectors, geographies and securities. Drilling down a level, we summarise below the main aspects of investment risk along with the key tenets of our approach.
Volatility Risk
The risk that swings in asset prices may impact the value of the investment.
Liquidity Risk
The risk that you may not be able to access the investment when you require it.
Expectation Risk
The risk that the investment case is invalid and unsuitable.
Credit Risk
The risk of default on a debt that may arise from a borrower failing to make required payments.