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Risk management

What is Risk Management?

In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk. These threats may be in the form of high inflation, market volatility, or recession risk.

Multi-asset funds not only diversify risk by asset class, but also employ risk management strategies to reduce potential downside risk and portfolio volatility.

Different asset classes have different levels of risk associated with them. The riskiest is generally considered to be equity investment, which can also offer the greatest potential returns.

 

Risk Management News from LGIM

As one of the UK’s leading investment managers, LGIM offers knowledge and experience that can bring real benefit to investors looking to control risk in their portfolios, and achieve a smoother path to reaching their desired client outcomes.

Our approach to risk management is embedded in our portfolios’ asset allocation with the aim of being prepared for a wide range of market outcomes. This is achieved partly by holding some defensive assets, but predominantly by spreading risk across a wide range of asset classes.

Our Asset Allocation team includes dedicated and experienced economists, strategists and portfolios, who combine their expertise to deliver clear client outcomes such as growth and income via diversified portfolios. The team’s disciplined, objective driven approach means we manage the risks that matter to clients, while aiming to deliver long-term risk-adjusted returns that meet clients’ needs.

Strategy

Do Italian BTPs* present an opportunity or a threat?

Five months is a long time in Italian politics. Back in June, we observed that Italy was too big to fail, but also too big to bail. We were also waiting for the almost inevitable clash with the European Commission over the budget. That has now arrived and we have started trading Italian risk in the new higher range for spreads.

* (Bubbling Tensions in Politics)

November 13, 2018 3 mins