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A GlobeRisk Perspective on Investment Risk

Investment risk arises from taking discretionary (or proprietary) positions in relation to a target benchmark, within a mark to market value domain. In effect, therefore, Investment risk is “relative” market risk.

In the case of a known or estimated liability profile, Investment risk exists if the asset portfolio does not exactly match the liability profile. In the case of pension funds or life Insurance firms, where the use of market consistent asset/liability valuation is not obligatory and/or convenient, risk management is more of an ALM matter.

Consideration of Investment risk is becoming increasingly important as investors take a more active approach to Asset Manager selection based on understanding value added - historically, investors have tended to be “sticky” with their money, and the principal objective of many Asset Managers was to increase Enterprise Value, regarded as a percentage of funds under management, so few firms felt an incentive to take significant levels of Investment Risk

GlobeRisk Investment Risk Services

These are essentially a customised form of market risk and/or Asset/Liability management. See that tab for further details.