Risk Management
The tactical asset allocation portfolios are designed to reduce volatility relative to the pertinent benchmark or reference point during all periods, and risk reduction measures are greatly expanded during periods when downside potential becomes elevated.
We define and identify risk in three primary dimensions: a) volatility b) overall portfolio correlation ratios c) potential for significant price declines resulting from any and all material factors, including: • overvaluation • poor technicals (including both short/intermediate and macro trends) • unfavorable economic conditions • unfavorable fiscal or monetary conditions • poor market dynamics.
Risk is managed on multiple levels: broad asset class, sector, and regional diversification employed with ongoing attentiveness to potential change in correlations; multiple hedging strategies that vary in nature and magnitude in response to market outlook; and a general attentiveness to fundamentals, technical considerations, and market dynamics. Though not easily quantifiable, a vital added strength has been the healthy skepticism of a diverse committee which continually asks, “What could go wrong, how soon, what is a meaningful worst case scenario, and how exposed would we be on an absolute basis under our current portfolio construction?”