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September 4, 2014 -

Better managing risk and complexity

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As investors and asset managers continue to navigate through ongoing issues, the need for risk management has become more critical than ever.

Asset owners and managers used to believe it was enough to buy bonds when stocks fell, and vice versa. Now, there is a higher degree of correlation between these two major asset classes.

This has reduced opportunities for portfolio diversification, which was not that long ago considered one of the fundamental building blocks in portfolio construction, and has led to:

  • A change in investment choices: including the rise in alternative asset classes, including illiquid long-term assets, and increased usage of derivatives to do so, and
  • More scrutiny on asset allocation, the embedded risk in the portfolios and the investment objectives of institutional investors from regulators and from internal oversight boards and committees.

Madhu Gayer, Head of investment reporting and performance Asia-Pacific at BNP Paribas Securities Services, details how to overcome this issue in the attached article – courtesy of ASFA Superfunds magazine – www.superannuation.asn.au/superfunds-magazine.