Risk management

Risk management is one of our key objectives across the investment process. Therefore, we adopt a strict and consistent approach.

Our risk management objectives

Monitoring and managing risk in each portfolio is an indispensable part of the investment process.

The Risk Management Unit serves a double purpose, as it:

  • Is an independent body ensuring that the risk appetite of each UCITS is consistent with the risk/return ratio specified in its investment strategy.
  • Performs a crucial role in the investment decision-making process, as it notifies managers of the possible investment risks in an accurate and timely manner.  

The Unit is able to effectively carry out its duties thanks to its team of seasoned executives who have high-level training in risk management. Processes are supported by integrated state-of-the-art technology.

The main risks we manage

Market risk

It is the most significant risk for mutual fund portfolios. It concerns possible losses that may arise from fluctuations in the market value of portfolio positions. 

Market risk differs among portfolios and depends on a portfolio’s exposure to parameters including share prices/indexes, interest rates, foreign exchange rates, commodities or credit spreads.

To monitor and control market risks, we carry out spot measurements implementing specific thresholds. We also run stress tests and analyse the outcomes. 

Liquidity risk

This risk concerns possible losses investors may suffer when they are unable to liquidate their assets at a reasonable price due to low market demand.

To monitor liquidity risk, we run stress tests. Then, we analyse the outcomes to try and mitigate the risk. 

Sustainability risk

This risk concerns environmental, social or governance conditions that, if present, could have significant actual or potential negative impacts on the value of the investment.

Environmental, Social and Governance (ESG) issues are important non-financial parameters that we factor in when assessing investment sustainability.

Our methods and tools

Maximum potential loss

Our main approach to measuring market risk is based on the Value-at-Risk formula. This approved and most widely used method allows us to calculate the overall risk for a portfolio.

Maximum potential loss is calculated on a daily basis. However, we regularly use historical data and stress tests on market changes to perform quantitative analyses of their impact on portfolios.

Other tools

Other supplementary but dependable tools we use to measure risk include volatility, the beta coefficient, duration and standard deviation from the benchmark.