Changing Demands of Risk Analysis

Institutional investors are facing unprecedented challenges in today’s rapidly evolving financial environment. In the past, these institutions typically used historical asset class performance data to make allocation decisions. They chose their managers mainly based on their performance in relation to a benchmark and waited for the monthly statements to arrive. As long as the markets kept rising, there was little demand for sophisticated risk assessment tools.

The global financial crisis ended those halcyon days. The market disruptions and widespread losses of 2008 and 2009 demonstrated that assumptions about the risk-diminishing effect of diversification and the probability of extreme market events were myopic. A proactive approach to portfolio risk management is no longer a luxury — it is an essential part of an institutional investor’s fiduciary duty. It is now imperative investors conduct better due diligence and oversight of their asset managers.

Download this whitepaper to learn more about the challenges investors face with assessing risk and potential solutions.