Experienced
Evaluation of Investment Strategies
The Situation: A need to monitor outsourced investment mandates
- A family office had outsourced its asset management functions to a selection of investment managers with a brief to achieve long-term growth while preserving capital.
- Independently, the family office wanted to actively monitor the capital preservation strategy in order to intervene if necessary.
The Challenge: Setting appropriate markers
- We were asked to help the family office to set markers for their investment managers; these markers would signal when to reduce exposure to riskier assets and when to exit riskier assets altogether.
The Resolution: Detailed guidelines to ensure adequate safety net
- Working with the family office, we established a detailed risk budget by asset class and set up a framework to monitor this process.
- We based our approach on a ‘pay back’ or ‘safety net’ concept, focusing on the acceptable time frame under which a portfolio would be required to recover losses after a drawdown.
- The family office were then able to set an overall risk limit, expressed as a function of the required recovery time.