Risk Management

Managing risk is a fundamental part of our approach to investing, and has been since our firm was founded in 1947. Our portfolio managers assess risk as rigorously as they seek reward, leveraging time-tested strategies that have weathered a variety of market conditions.

Across our portfolios, we take a comprehensive, integrated approach to managing investment risk, based on the belief that risks should be recognized, rational and rewarded.

RECOGNIZED

Identify and understand risk at the security, portfolio and strategy level.

RATIONAL

Affirm that identified risks are an intended and rational part of each portfolio's strategy

REWARDED

Verify that every risk provides the potential for commensurate long-term reward

Our Approach

Managing investment risk starts and ends with our portfolio managers, who look at both risk and return from every angle as they navigate today's complex investment landscape. Dedicated risk management specialists support our portfolio managers in conjunction with oversight committees and the application of sophisticated risk-management tools.

Portfolio Managers

Our portfolio managers:

  • Employ a fundamental, research-driven approach to managing assets.
  • Assess risk at each stage of the investment life-cycle - including investment selection, portfolio construction and ongoing portfolio evaluation.
  • Are backed by the strength and stability of our global organisation, which enables them to maintain a long-term perspective

Dedicated Risk Management Specialists

Our dedicated Risk Management Specialists are:

  • Independent, providing robust analytics and critical, unbiased insight on each portfolio's risk profile.
  • Integrated into our global portfolio and trading network, co-located with portfolio managers around the world, to support our activities in markets where we invest.

Oversight Committees

Our oversight committees focus on helping portfolio managers understand the most complex risk factors associated with:

  • Derivatives and complex securities: review all complex securities to identify risk factors prior to purchase.
  • Pricing and liquidity: analyze security valuations in emerging, frontier and other markets where liquidity may be limited.
  • Counterparty risks: assess risks posed by the banks, brokerages, and investment firms who act as trading partners.
  • Global product development: consider potential risk factors as part of new product development.

Tools and Platforms

Our portfolio teams also leverage centrally-supported, best in class platforms that provide additional insight, including:

  • Data analytics and modeling
  • Portfolio compliance
  • Trade monitoring and execution

Our comprehensive risk management approach seeks to identify and manage "five hidden risks" that others may miss and can cause unintended consequences for portfolios.


1. Hidden Portfolio
Concentration

Unrecognized concentration in exposure to industries, currencies or market risk factors can compound the risk exposure in a portfolio.

Our Approach

  • More than 100 risk and performance specialists provide independent unbiased "top-down" analysis, which can help uncover hidden portfolio concentrations and expose unintended risks.1

2. (Mis)use of
Derivatives &
Complex Securities

Lack of full understanding of performance or other characteristics associated with complex securities.

Our Approach

  • Established a Complex Securities Review Committee in 2007.
  • All positions in derivatives and complex securities are thoroughly vetted.

3. Global/Emerging
Market Risk

Under-managing risks associated with global, emerging and frontier markets securities, such as limited liquidity, reduced corporate governance and lack of standard accounting practices.

Our Approach

  • With over 650 investment professionals2 worldwide and offices in 34 countries, we have global perspective built on first-hand local insight.
  • Our 15 dedicated local asset management teams live and invest in local markets, bringing in-depth understanding of the markets they serve.
  • Over 70 years of experience across global markets

4. Concentrated
Exposure to
Counterparties

Failure to diversify and actively monitor or manage counterparty credit exposure.

Our Approach

  • We established a Counterparty Credit Committee in 2007 to monitor and manage the risk posed by counterparties (the banks, brokerages and investment banks that act as trading partners).

5. Tunnel Vision

Relying on a single model-driven or purely quantitative approach or data source to evaluate and manage risk.

Our Approach
We take a multi-dimensional view of risk, leveraging:

  • Experienced portfolio managers and time tested-strategies.
  • Integrated and independent global risk and performance specialist teams.
  • Oversight committees provide guidance on the most complex risk factors.