Partners Capital Approach to Risk Management c. 2013
Risk management is about knowing what you own. At the simplest level, Partners Capital’s risk management is achieved with our client portfolios through asset class and asset manager diversification and through a deep understanding of what each asset manager is doing. That is the essence of our risk management.
Any insights we may have about risk management stem from our somewhat unique perspective of risk which is that there are some risks that we want to take and for which we believe we will be paid handsome returns and then there are risks that are quite simply not paid for. For example, investors are paid explicitly for taking default risk on a corporate bond by being paid c. 6% interest income for the loan. Examples of risks that investors are not paid for include fraud, theft, trading errors, extreme asset class or asset manager concentration (the opposite of diversification) and foreign currency risk.