Risk Management

Discussing risk in the absence of a time horizon is meaningless.  An investor’s time horizon is essential to understanding his or her capacity to handle risk.  If you absolutely need to have access to all your money instantaneously, then you have a very low time-risk tolerance and the prospect of a short term quoted price decline is your definition of risk.  As such, you should have all your money in treasury bills. If, like most investors, you have a longer-term horizon, you should measure risk (i.e. the chance of losing money) as a decline in unit price, measured over a reasonable period.

So over what time period should decline in unit price be measured?  We believe three years is the minimum period over which to evaluate any investment manager since shorter periods can give very misleading results – a manager may be brilliantly building positions in undervalued companies or may be stubbornly pouring good money after bad in overvalued companies.  Three years is the point at which one starts to cross over from the ‘voting’ to the ‘weighing’ characteristics of the market; although five to ten years is required for the real shift to occur.

Invespettro recognizes the need for superior capabilities in the listening, identification, assessment, prioritization, management, reporting and monitoring of risk, both at the institutional level and at clients’ investment portfolio level.

We practice risk management within the strategic, operational and financial planning process, and seek to focus on what matters most: risks that may impede business priorities. Regular risk discussions take place across all levels and risks are proactively identified and managed.