Risk & Portfolio Management

Sizing of positions is based on a variety of factors, including, but not limited to: strategy, volatility, correlation, diversification, liquidity and the potential investment’s impact on the current portfolio. Subsequent risk monitoring and due diligence is integral to the on-going portfolio management activities; we look at both market factors as well as business risks at the underlying funds. Both qualitative and quantitative methods are used to fully understand the Fund’s market positioning and exposures. This continued analysis is designed to quickly identify style drift and significant changes in underlying managers positioning and risk parameters which would lead us to reassess the position and exit if necessary to maintain a disciplined risk management approach.

We are strong believers in building relationships with our underlying managers. As part of our approach to managing a portfolio capable of navigating across market cycles we look to identify funds that have the potential to be multi-year investments. Indeed many of our portfolio holdings today have been in the portfolio for a significant number of years. Building strong relationships with our underlying managers is critical from both a capacity perspective as well as ensuring that we maintain a strong understanding as to how the firm and investment process evolves. The relationships that we build with our underlying managers is also a key source of market intelligence on new potential investments.

Whilst in an ‘ideal world’ we would like to invest in managers for multiple years, history dictates that this cannot always be the case. Managers may typically be removed from the portfolio in a number of scenarios. The most common is through poor performance, which may be relative to their peer group or just poor absolute performance that differs from our anticipated return for the manager given the environment. In other cases style drift, business risk, departure of key personnel and regulatory issues may also be factors. A change in the Investment Committee’s market outlook may also be a cause for redeeming from a manager; however, this is more likely for a satellite holding.