Entries by Alec Crawford

    Risk Management: The Unexpected Benefits

    February 12, 2015 5:15 PM by Alec Crawford

    Careful portfolio monitoring can help add alpha, reduce style drift, and limit accidental factor bets.

    In the popular mind, risk management is all about disaster prevention. If the market hits an air pocket, risk management provides the parachute.

    And that certainly is important. By looking at portfolio metrics and running hundreds of scenario analyses, a good risk management team can provide portfolio managers with a reasonable depiction of the downside risk they face for a particular shock, whether it’s a surge in the value of the dollar, a plunge in oil prices, or any number of other outlier events. But risk management can also reveal less obvious dangers, help a portfolio avoid style drift, and even eliminate portfolio inefficiencies.

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