Manage investment risk in three steps

Conclusion Broadly speaking, investment management concerns optimal expenditure of risk budgets. To this end, diversification, hedging and insurance represent three complementary rather than competing techniques. Diversification should be used to achieve efficient risk-adjusted returns; hedging should be used to control systematic risks such as interest rates and inflation; and, finally, insurance should be used to implement downside protections. Academic research in dynamic portfolio theory suggests the three techniques can be used together.

 

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‘Not an ATM’: Sicilia shrugs off private credit liquidity fears

The chief investment officer of the $150 billion industry super fund says that Hostplus’ portfolio will weather the ongoing downturn in software companies and that moves by a number of large private credit managers to gate their funds are a result of the asset class being offered to retail investors who should not have assumed the funds would be liquid enough to get money out when everybody else is trying to do the same.

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