risk management
We view risk management as a competitive advantage, contributing directly to alpha. Our designated Risk team, led by Chief Risk Officer Adom Maxime, combines decades of experience navigating challenging markets with innovative, technology-enabled approaches to provide deep insight into sources of risk and tools to harness it for alpha generation. From sophisticated portfolio construction to selective hiring of talent and rigorous training, risk management permeates every aspect of our business. To this end, we build close relationships and ensure ongoing dialogue with risk-takers and with all other teams across the organization
Our Risk Management Framework
Risk management is a critical part of our investment process. Working within a well-defined risk framework, we leverage the skills, expertise and research outputs of our teams to tailor risk exposure across our portfolio in a way that maximizes returns and reduces potential drawdowns.
We take an adaptive approach to risk management, empowering investment teams with leading tools and systems to quantitatively evaluate, measure, monitor and optimize investment portfolios. Our Investment Committee plays an active role in this ongoing and evolving process.
Our Risk team works closely with our Repo and Portfolio Finance teams to manage funding risk on the portfolio of securities. We closely monitor cash reserve levels to ensure a sufficient level of capital under both normal and stressed market conditions. The margin utilization of each trade feeds into our portfolio optimization process to ensure efficient use of this resource.
We systematically evaluate all potential stress factors and scenarios to manage exposure across our portfolio. Our focus on understanding economic and political event risks allows us to identify and mitigate tail exposures to ensure the right balance between risk and reward. Our focus on sector allocation ensures that we have a balance of risk across every investible sector and can seamlessly navigate market volatility to deliver returns for our investors.
We use a range of approaches to monitor portfolio liquidity, both the expected timescale to liquidate some or all of the positions and the expected cost of doing so. We ensure that even in more liquid asset classes, such as listed equities and sovereign bonds, the firm’s positions do not become sufficiently concentrated to breach liquidity thresholds. In addition to monitoring current market liquidity levels, we model liquidity scenarios during periods of market stress.
