This holistic executive report will include discussions of risk appetite, risk governance, board risk communication, and board risk training, and will address how highly technical and granular data can be synthesized so that it can be reported to a board that may only meet for three hours every three months, in turn informing the decisions the institutional investors make.
Increasingly institutional investors have been using hedge funds in their portfolios, and as they move more into these alternative investments, their data collection and reporting will become more complicated as the requirements of alternative investments are more demanding. A high degree of investment analysis is needed before buying, and there is a limited amount of historical risk and return data available for this type of investment. Institutional investors will need more help understanding and mitigating the risks involved.
You are provided with information regarding pension fund and endowment risk management techniques, which will also be applicable to trustees of other institutions with large investment portfolios.
This compelling report teaches you:
- How to institute a new framework for risk management for pension funds and endowment funds.
- What are the key factors to monitor (including data collection, risk reporting and governance).
- How to identify and report on the most critical emerging issues and information to oversight boards.
- To introduce checklists for practitioners to benchmark the practices of their organizations.
- How to fit this framework into a holistic governance framework.
Risk Management for Institutional Investors will provide many checklists for practitioners to benchmark their organization's practices. This is imperative for overseers (board members or trustees) as well as for those reporting to them. Readers will have a better understanding of how a risk management framework fits into a complete governance framework, and will also have a roadmap of the key risk analytics tools and how they can be harnessed to provide oversight boards with a better understanding of the effective control of risks.
Risk Management for Institutional Investors is an essential good practice guide for board-members and the people who report to them, addressing best practice compliance issues and giving comprehensive and straightforward strategic investment guidance.
About the Authors
1. What are the Current Risk Governance Practices of Institutional Investors?
- Profile of the Respondents
- Exposure to Complexity
- Risk Governance
- Chief Risk Officer Role
- Risk Management Resource Allocations
2. Practitioner Insights
- Leslie Rahl
- The Fiduciary Challenge
- Managing Risk (not Avoiding It)
- Risk Visualisation/Communication
- Asking the Right Questions
- The Value of Value-at-risk
- He Who Does Not Learn from History Is Doomed to Repeat It
- Akshaya Bhargava
3. Risk Leadership
- Risk Perspective
- Risk Culture
- Risk Strategy
- Risk Appetite Statement
- Risk Budget
- Risk Governance
- Risk-based Compensation
- Case Study: Aligning Data Transparency with the Governance Framework
- Appendix 3.1 Annuity Portfolio: Investment Policy Statement
- Appendix 3.2 Risk Parameters: for Sample Hedge Fund (The “Fund”)
4. What is the Alternative?
- Focusing on Beta Strategies
- Advent of Alternative Investments
- Deciding to Allocate Risk to Alternative Investments
- Risk Oversight Capabilities Needed for Alternative Investments
- Case Study: Practical Portfolio Management Issues When Investing in Alternatives
5. Practitioner Insights
- Select Well-compensated Market Risks – Minimise Exposure to Other Risks
- Disciplined Implementation/Execution of Innovative Strategies
- Analysing a Potential Crisis Is Easy, the Challenge Is Predicting It
6. Holistic Risk Management
- Investment Risk
- Counterparty Credit
- Valuation Risk
- Investor Relations
7. Practitioner Insights
- Creating Effective Communication Between Management and the Governing Board
- Investment Data's Unwillingness to Follow Rules
- Using the Combined Insights of the Organisation
8. Risk Aggregation
- Traditional Investments
- Systems to Aggregate Risk
- Aggregation Is More Than Volatility
- Hedge Funds
- Private Equities
- Real Estate/Resources
- Summary of Conclusions
- Case Study: Building a Robust Multi-asset Class Risk Infrastructure
9. Risk Analysis: Measurement, Monitoring and Reporting
- Individual Holding Risk Information
- Portfolio/Asset Class/Business Risk Information
- Common Factor Risks
- Macro Risk Factors
- Performance Measurement and Analysis
- Environmental Scanning
- Creating an Actionable Information Flow
- Case Study: Investment Risk Aggregation and Reporting
10. Risk-Efficient Portfolio Construction
- Asset Class Diversification
- Drawdown Diversification
- Passive Exposures
- Active Exposures
- Drawdown Exposures
- Dynamic Portfolio Construction
- Risk Reporting
11. Practitioner Insights
12. Investor Best Practices
- Hedge Fund Failures
- Achieving Best Practices
- Investor Best Practices