Boards and executives of long-term funds, such as pension plans, sovereign wealth funds, and endowments need to manage their portfolios to meet their long-term purpose, which may be decades or more into the future.

Yet no fund has the luxury of looking only to that long-term time horizon. Each must also meet expectations in the near term in order to continue in its role and with its investment strategy. This challenge of meeting both long-term obligations and short-term expectations means that even the longest-term investor must manage across multiple time horizons. This necessity is often at odds with most risk processes, which have been developed to address short-term risks or to target long-term return—but not both.

FCLTGlobal, with input from its members, which include many of the world’s leading asset owners and investors, has raised this challenge as central to their ability to take advantage of their long time horizons. Too often, funds carefully set up long-term investment strategies, with a focus on meeting their ultimate purpose, only to shift to a short-term strategy in response to stressful market conditions.

Article

When Boards Should – and Should Not – Lead on Risk Management

21 October 2021 - By Allen He Oversight boards and their investment teams often speak different languages when it comes to risk. The often repeated pattern is one of in depth discussions without clarifying long-term implications – not seeing the...

Learn More
Portfolio risk header

Strategy | Article

How to Talk About Portfolio Risk

1 April 2019 - Long-term funds need to manage their portfolios to meet their long- and near-term expectations simultaneously. This challenge demands assessing risks and opportunities across multiple time horizons. However, board members and staff often use different language...

Learn More
Risk Conversation Guide

Strategy | Toolkit

Risk Conversation Guide for Boards and Staff

21 December 2018 - To facilitate discussions about managing portfolios to both meet long-term objectives and weather short-term risks, FCLTGlobal, with input from its members, has developed this Risk Conversation Guide for boards and staff. We have provided illustrative answers to these questions, but these are not intended to be exhaustive or comprehensive.

Learn More

Video

Balancing Act: Investment Voices on Managing Multi-Horizon Risk

5 January 2022 - FCLTGlobal’s eight-episode risk webinar series encourages implementation of long-term tools from Balancing Act: Managing Risk Across Multiple Time Horizons and offers continuing professional education for a broad audience of investment professionals. This video serves as a one-stop resource to inform and to encourage longer-term management of investment risk.

Learn More

Strategy | Video

Highlights: Risk Over Time with State Street Associates

9 September 2020 - For many investors, asset allocation begins with an estimate of volatility, producing the most stable portfolio of assets that still can earn the target return. An assumption underpins this process – that volatility has a mathematically-certain relationship with time. That assumption is empirically false, and the ramifications for diversification and strategic asset allocation are enormous. Learn more from experts at State Street Associates about how the choice of risk timeframe influences a portfolio’s long-term success.

Learn More

Strategy | Video

Highlights: Risk Webinar Series, Time Horizons (with State Street Associates)

12 October 2020 - For many investors, asset allocation begins with an estimate of volatility, producing the most stable portfolio of assets that still can earn the target return. Learn more from experts at State Street Associates about how the choice of risk timeframe influences a portfolio’s long-term success.

Learn More

Video

Highlights: Risk Webinar Series, GIPS Compliance and FRM Certification

14 October 2020 - Standard-setting and certification represent defaults of a profession, and for the investment risk profession these functions belong to the CFA Institute’s Global Investment Performance Standards (GIPS)and Global Association of Risk Professionals’ Financial Risk Manager (FRM) certification. Control of defaults is one of the most influential nudges, according to behavioral scientists. Long-term investors will note that these nudges can have encouraging, discouraging, or no impact on risk professionals’ long-term focus. FCLTGlobal will explore the nudges related to investment time horizon in this Risk Webinar episode featuring leaders from the CFA Institute and GARP, as well as a senior practitioner from Nuveen.

Learn More

Video

Highlights: Risk Webinar Series, Climate

11 November 2020 - Climate change is the largest systemic risk in the view of many long-term investors, and investors are pioneering ways to address this risk, including work to apply existing risk statistics specifically to climate projection and to pioneer new estimates. Projections like these about the impact of climate change on investment performance would represent enormous progress because they would advance beyond general uncertainty and instead make climate change a specific component of risk management.

Learn More

Video

Highlights: Risk Webinar Series, Time Diversification

13 January 2021 - “Time diversification” is a principle that an investor’s statistical probability of loss decreases as the holding period increases. Long-term investors may overinterpret this statistical principle to indicate that risk in all of its forms is lower. In fact, longer holding periods also expose investors to a greater scale of potential losses and to more experience with turbulence. Our September webinar introduced the way in which these patterns have implications for diversification and asset allocation, and the implications also extend significantly to the way in which long-term investors define and estimate risk.

Learn More

Video

Highlights: Risk Webinar Series, Income Volatility and Distribution

4 March 2021 - Forthcoming research examines societal income distribution in the statistical sense – such as its volatility, skewness, and kurtosis – and relates it to the macro risk distribution faced by investors. This analysis tests the hypothesis that investors’ efforts to reduce volatility reallocates it to individuals in the form of income volatility, and raises the question - Are investors’ risk management practices contributing to inequality?

Learn More

Video

Highlights: Risk Webinar Series, Navigating Crises As Long-term Investors

3 May 2021 - Crises happen. Long-term investors are more exposed to them simply by virtue of their long holding periods. Their task cannot be to avoid crises, so instead they have to be resilient to them, which includes being able to anticipate them as well as possible so that board and staff know what they can expect, prepare accordingly, and proceed with their eyes wide open. The most widely-used statistics of investment risk, value-at-risk and probability-of-loss, omit details about what happens within an investment period, including how to know when systemic risk is rising and what might happen to their allocations, and newer statistics are beginning to gain traction to address these concerns.

Learn More

Video

Highlights: From Risk to Opportunity in Innovative and Adaptive Markets with Andy Lo

17 May 2021 - In this final episode of FCLTGlobal’s risk-webinar series, we turn our attention to why long-term institutions manage investment risk in a multi-horizon way: because it positions them for pursuing opportunities purposefully and strategically.

Learn More

In the News

FCLTGlobal: Climate risk visible in all transactions

15 December 2021 - A recent webinar hosted by FCLTGlobal, the not-for profit that aims to focus capital on the long-term to support a sustainable economy, urged investors to allocate more to emerging markets to solve the climate emergency and consider climate risk in every transaction.

Learn More

In the News

Entrenched risk-management practices will yield to climate trends

12 August 2021 - Antiquated risk management practices will be forced to evolve to accommodate climate risks. By estimating the future instead of just measuring the past, risk managers will own the beliefs and strategies that underpin their projections researchers at FCLTGlobal predict.

Learn More
Data Header

Article

Implementing Multi-Horizon Investment Risk Measures

30 March 2021 - On March 24th, 2021, FCLTGlobal led a risk focus group alongside Alison Taylor and Brian Harward, a team of behavioral scientists from Ethical Systems, an in-house think tank at NYU’s Stern School of Business. The conversation brought together subject matter experts and decision makers with the aim of both understanding why long-term investors default to short-term measurement methods and identifying barriers that prevent them from better aligning risk with their investment horizons.

Learn More
Balancing Act

Strategy | Article

New Phase of Research on Investment Risk Addresses Long-term Risk Measurements

1 February 2021 - Through the second phase of our risk research, FCLTGlobal hopes to learn from members why implementation is not happening, what is needed to increase it, as well as to draft a list of hypothetical tools to change behavior.

Learn More

Strategy | In the News

Climate Risk is Investment Risk: Fink

12 November 2020 - ...

Learn More

Strategy | Video

Long-term Risk Management: Neuberger Berman

26 October 2020 - An interview with Diedre Ypma, Managing Director at Neuberger Berman

Learn More
Placeholder image

Strategy | Article

Communication key in pension risk management through coronavirus and beyond

26 May 2020 - This article originally appeared on investmentreview.com. “Trustee directors need risk information in order to fully govern and oversee their organization in a long-term manner. The way the information often is communicated though involves risk professionals presenting...

Learn More

Strategy | Article

Recap: 2020 Forum on Risk

6 May 2020 - On 30 April, FCLTGlobal held a webinar for a peer-to-peer discussion on managing risk to support long-term value creation, specifically in light of the ongoing coronavirus pandemic.

Learn More

Strategy | In the News

Risk management in a time of crisis

14 April 2020 - Markets in disarray are where long-term investors make their money. Investing countercyclically – when many others without long-term liquidity are selling – is a clear advantage for long-term investors. Investors that perform the best over the long term will have taken calculated and deliberate risks and put money to work during crises like this one.

Learn More

Strategy | Article

Five tactics for managing portfolio risk

7 April 2020 - Events of the past century tell us that markets almost always recover in the long run. This does not mean that investors should ignore short-term circumstances, nor does it mean they should abandon well-crafted plans...

Learn More

Strategy | Article

Future Fund’s Will Hetherton on Long-term Risk for Investors

11 November 2019 - FCLTGlobal's process for developing tools to address long-term investment risk includes interviewing risk management experts.

Learn More

Strategy | Video

Long-term Risk Management: Future Fund

5 November 2019 - An interview with Will Hetherton, Head of Public Affairs & Strategic Relations at Future Fund, Australia’s sovereign wealth fund.

Learn More
ATP Flag Header

Strategy | Article

How ATP Manages Investment Risk

10 May 2019 - Boards and executives of long-term funds, such as pension plans, sovereign wealth funds, and endowments, need to manage portfolios to meet their long-term purpose, which may be decades or more into the future. In Balancing Act: Managing...

Learn More

Strategy | Video

Member Insights: Long-term Risk Management

23 March 2020 - Interviews from our members on how they assess, manage, and plan for long- and short-term portfolio risk.

Learn More

Strategy | Video

Long-term Risk Management: Washington State Investment Board

9 July 2019 - An interview with with Fred Gjerstad from Washington State Investment Board.

Learn More

Strategy | Video

Long-term Risk Management: CPP Investments

9 July 2019 - An interview with with Rocky Ieraci and Steven Richards from the Canada Pension Plan Investment Board.

Learn More
2019 Forum on Risk

Strategy | Article

Recap: 2019 Forum on Risk

9 July 2019 - On 30 May, FCLTGlobal Members and guests met in Boston for a peer-to-peer discussion on managing risk to support long-term value creation. The Forum on Risk: A Balancing Act provided a venue for participants to exchange examples of multi-horizon risk management, including successes in practical applications and challenges with implementation.

Learn More
Balancing Act

In the News

The Hidden Risk When You Own Stocks for the Long Run

15 March 2019 - Now more than ever, investors need to decide whether they want to lock up their money in bets that could pay off richly–or fail disastrously–down the road.

Learn More

In the News

Managing Risk Across Multiple Time Horizons

15 February 2019 - A new paper by Focusing Capital on the Long Term (FCLT) acknowledges that investors typically have competing time frames while most of the tools for risk and performance management are for only one investment period. The...

Learn More

Strategy | Article

Interview: BlackRock’s Emily Haisley on Risk for Long-Term Investors

18 October 2018 - FCLTGlobal, with its Members, is developing practical tools to address the issue of balancing long- and short-term risks. Part of the process includes interviews with experts in the area of assessing, managing, and planning for...

Learn More

Strategy | Article

Interview: State Street Global Exchange Experts Speak on Long-Term Risk

9 October 2018 - FCLTGlobal, with its Members, is developing practical tools to address the issue of balancing long- and short-term risks. Part of the process includes interviews with experts in the area of assessing, managing, and planning for...

Learn More

Strategy | Article

Interview: Roland Kupers on Risk for Long-Term Investors

25 September 2018 - Investors often face a challenge of meeting long-term obligations and maintaining the support of their constituents along the way. In particular, they need investment strategies to meet their long-term obligations, but current risk communications, behaviors,...

Learn More

Strategy | Article

University of Toronto Publishes Study With FCLTGlobal on Risk Assessment Practices

10 September 2018 - FCLTGlobal’s research is designed to find practical solutions that encourage farsighted decision making within the investment industry. The work we do is primarily intended to explore how every actor on the investment value chain –...

Learn More