Aerice Consulting Flags Up Portfolio Risk Challenges for Pension Fund Managers.

Aerice Consulting has flagged up some key issues facing a number of pension fund managers, with regard to risk management strategies – including the importance of focusing on risk concentrations at portfolio level, and implementing measures to capitalise on risk return beta.

Commenting at a recent Aerice Consulting round table briefing, director Stuart Owers explained:

“In these challenging economic times, pension fund managers are under increasing pressure to diversify their portfolios in order to deliver return on assets (RoA).  This can involve raising the stakes in terms of risk exposure, particularly for long-term investment strategies. Pension fund managers are required to  constantly consider the macro risk framework, in order to form the basis of the leverage ratio’s and where to de-risk in the trading environment as much as possible, while still capitalising on a potential market upturn.   Being able to understand, evidence and clearly articulate the impact risk has on portfolio behaviour is key here through robust systems reporting.  Through the use of strategic platforms and more accurate and timely reporting as part of a risk framework fund managers can have a greater understanding of the portfolio’s behaviour and thus positively impact  its Net Asset Value (NAV) in order to maximise RoA.  This relies in turn on adopting best-practice risk management – across the key risk pillars of portfolio, people, process and systems.  Integration across these areas is key as it helps to provide timely and more accurate information from the risk framework.”