Investment risk management practices, and their ramifications on asset allocation, contain a hallmark example of a challenge that FCLTGlobal was founded to address. Our members understand that capital markets can misallocate resources, particularly as a result of pressures for short-term results, and also that markets will not correct these problems themselves. Long-term investors have known about the short-term default settings for risk management for at least a decade, often much longer, but behavior is not changing at scale yet. FCLTGlobal presents Balancing Act: Investment Voices on Managing Multi-Horizon Risk in order to encourage this change.
Balancing Act: Investment Voices on Managing Multi-Horizon Risk is a video resource for institutional investors that are interested in focusing more on the long term through the way that they manage investment risk. This resource includes:
This content can help long-term investors balance the pressure for short-term results, reallocate capital accordingly, and meet the responsibilities that they have to their constituents and stakeholders. Institutional investors can apply it as a resource for:
We expect that this material can be most helpful in an interactive group setting. Investment institutions have different purposes, and each individual institution will have to think critically about how to apply these insights to its risk management. The diversity of a group setting likely will aid this critical thinking, and a facilitated interaction will permit the group to view the material with a deliberate pace, including pausing for discussion when needed and to conduct the several scenario exercises embedded in the video. Groups may even choose to build and conduct simulations based on this information, a proven intervention to encourage longer-term behavior in the risk domain.
Institutional investors that would like additional, deeper perspective on the topic of multi-horizon risk management can refer to FCLTGlobal’s library of content on the subject, including toolkits for trustee directors, executives, and risk teams to use in stable times and a moments of crisis and archived video from the 8-part webinar series that underpins this video.
For further information about FCLTGlobal’s work on multi-horizon management of investment risk, please contact Matthew Leatherman ([email protected]) and Allen He ([email protected]).
Long-term institutional investors know that short-term risk management does not put them in a position to earn the type of return that they need or to fulfill their new and evolving responsibilities. Instead, they look to investment risk professionals to frame their long-term focus on issues ranging from asset allocation to trends like climate change and income inequality. This means giving these professionals experiences beyond the default perspectives set in the FRM certification and GIPS reporting standard. Balancing Act: Investment Voices on Managing Multi-Horizon Risk is one important way in which they can do so.
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...
Strategy | Report
21 December 2018 - 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...
Strategy | Toolkit
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.