Managing the risk

Funds of funds spread assets over a wider range of securities, but run the risk of diluting the fund manager's best ideas

The investment management process is a judgement call between risk and return. Risk to the investor can be summarised as either absolute or relative risk. Absolute risk for investors is simply the risk of losing money. Relative risk looks at an investment against an agreed benchmark index, and assesses the exposures to characteristics that are likely to result in performance differentials. Our goal with risk analysis is to understand and try to control the volatility and range of portfolio returns. We believe it is more effective to look at relative rather than absolute risk. Absolute r...