All investors and money managers know that investing has risks. A primary aspect of investing is managing investment performance risk and doing so in the context of one’s return objectives. This presentation examines investment performance risk from the perspective of the investor and from the perspective of the money manager.  Investment performance risk is a multifaceted subject and it must be understood as to the causes of investment performance risk, the degree of risk present, the consistency of risk with an investor’s return objectives and the consequences of inappropriate or misunderstood levels of investment risk.

An investor managing one’s own investments must understand the various risk generating aspects of one’s portfolio and the contribution they are targeted to make with respect to the return of the portfolio. The investment performance risk and return objectives of a portfolio should be viewed within a defined timeframe that is extended on an ongoing basis.

When employing a money manager to manage one’s investments, it is equally important that the risk elements to be present and employed in the management of a portfolio be well defined and understood, addressed in guidelines, be consistent with the investor’s portfolio performance objectives and reflect a portfolio’s targeted performance or performance benchmark(s). One of the elements of investment performance risk is the presence of leverage. The use of leverage can be an important means of enhancing the return of a portfolio, but it can also dramatically increase the risk of a portfolio. Leverage is frequently a misunderstood investment management concept and this presentation will provide an in-depth look of leverage with respect to the understanding of leverage, its identification and measurement and the methods by which leverage can be created. 

To gain an in-depth understanding of investment performance risk and how to address it as an individual investor, as an investment management firm and in an investor/money manager relationship. Particular focus is given the relationship of investors and their money manager and the attention that must be given to the portfolio components generating investment performance risk and to their management.

Portfolio management is becoming more and more complex. Breaking down, understanding and managing the elements that can generate investment performance risk is critical. An investment portfolio over its life is managed in many different economic and financial environments and the elements producing a risk to a portfolio must be managed in the context of these varying environments. In addition, investors are frequently introduced to individual structured investments and hereto, an investor must be able to dissect and understand the risks of a standalone investment and correctly evaluate the risk/return profile of the investment.