Following the success of the popular COO/CFO roundtable series, and based on strong support from our members, AIMA Australia is pleased to invite you to the inaugural, manager-member only, Actionable Insights: Integrating portfolio and risk management to deliver superior investment performance, a discussion forum targeting senior investment and ‘front-office’ risk management professionals (chief investment officers, portfolio managers and hands-on risk professionals). 

 

Successful and insightful risk definitions, measurement, monitoring, and management are a crucial component of all successful investment decisions, investment teams, and investment strategies, and unquestionably provides an edge for those managers who are able to build high-value, integrated investment teams, where risk is at the core of what they do.  Afterall, risk and return are opposite sides of the same coin, and we are certainly better placed to more accurately and appropriately manage risk, rather than returns.

 

In addition to talent, best-in-class investment teams and strategies frequently have one thing in common: they have very well defined, consistent and aligned notions of ‘risks’ that encapsulate what an investment team is looking to do, and which drives all investment, portfolio and risk decisions.  Such teams, and individual investment professionals, focus on: actively determining risks to expose the portfolio to, actively allocating to multiple types of investment risks, sizing their overall risks and determining the right amount to be managing, and avoiding risks that they do not feel they are being appropriately compensated for. 

 

Ultimately ‘risk’ defines best-in-class investment strategies, reflects each investment team’s investment principles, and links individual security selection, to position sizing, to the overall exposures of a portfolio, to well-defined metrics that allow portfolio managers to better measure, monitor, allocate and manage risk at the portfolio level.  Consequently, an aligned, integrated team, where all the individual components and skills of investment management come together, is likely to increase the odds of teams achieving long-term, sustainable success.

 

Risk measurement, allocation and management must therefore be front and centre of investment teams, yet historically it has too frequently been ‘outsourced’ to ‘independent risk teams’, with a focus on governance and reporting, rather than focussing on enhancing investment decisions, related to portfolio and risk management, security selection, position sizing, and portfolio construction.  Further such teams typically do not have the experience, bandwidth, or tools, to focus on detailed analytics that than bring together ‘risks’, expected returns, actual returns and ‘exposures’, aligned to the way a particular investment team see the world and executes their strategy.  A one-sided, traditional risk-view is therefore likely to be underwhelming, and lack the resolution to be value additive to the investment teams.

 

It’s unsurprising then to find that many managers have been disappointed in the overall value that is derived, beyond low value-add reporting and governance, from traditional risk functions.  While such functions play a part in policing a team and strategy, as competitive forces continue to force us to relook at all we do across our organisations, a more integrated portfolio and risk management solution may offer significant potential to uplift all aspects of investment management. 

 

Our aim is to explore this integrated model, along with other solutions, and share challenges in building high-value add investment teams, to help manager-members shape their portfolio and risk management strategies going forward.

 

We expect that we will hold this roundtable series on a quarterly basis, providing an informal meeting within which a multitude of ideas and challenges can be shared and explored under strict Chatham House rules.  The agenda will be set by attendees, and a broad discussion is expected, given our experiences with the COO/CFO round table series

 

NB: please feel free to pass this invite on to the chief investment officers, portfolio managers and hands-on risk professionals, or equivalent, in your organisation.

 

As there is no set topic, it is intended that attendees are free to discuss issues/problems in an open and confidential environment. Attendees will determine the agenda by advising of their topic suggestions when registering.

 

Chatham rules will apply.