Expatriate Wealth Risk Management

While the due diligence process helps to determine if a manager will receive an allocation, Our comprehensive risk management ensures that only appropriate managers remain in a given portfolio. Our risk management team continually monitors each manager using both quantitative and qualitative metrics.

Quantitative Analyses include:

GENERAL PORTFOLIO STATISTICS
Level of Positions ~ What are the fund’s typical levels of investment in both long and short positions, on a gross as well as net basis? What are the concentration, liquidity, percentage use of derivatives and percentage use of small and micro-cap stocks for these positions?

Risk Factors of Positions ~ What are the country, currency, product, sector and credit risks associated with the fund’s positions? How much leverage is used by these positions?

Valuation of Positions ~ Where does the manager get prices for the fund’s positions? How often are the fund’s positions valued? Are marks provided or verified by a third party?

RISK FACTOR EXPOSURE
Defined Risk Factors Per Fund ~ What is the overall fund’s exposure to risks related to interest rates, equities, credit, currencies, commodities and other factors?

Defined Exposure Ratios ~ How do moves in various benchmarks generally affect the fund?

PORTFOLIO RISK MANAGEMENT
Value at Risk ~ What is the VaR for each of the funds in a portfolio? What is the VaR for the entire portfolio?

Scenario Risk Tests ~ How was the fund affected (or how would it be affected) by substantial historic events?

Stress Tests for Non-Linear Market Moves ~ How does the fund perform in markets that are typically detrimental to the fund’s strategy or trading style?

Our qualitative review process focuses on changes in the fund since original due diligence was performed. These include:

  • Change of service providers
  • Personnel turnover
  • Change in assets
  • Change in systems or infrastructure
  • Change in the position-marking policy
  • Change in major risk exposures

Proper calculation and interpretation of quantitative risk measures require a thorough understanding of the manager’s trading strategy and style.