Given the main tenet of our philosophy is real return investing, the greatest risk is loss of capital, rather than underperforming an index. There are two areas of risk control embedded within the investment.
Position Risk
Buying a poor company is the greatest risk. We visit management whenever possible and carry out in-depth fundamental analysis. We only hold 25-40 companies all of which we know well. Should equity valuations become excessive, the proportion of our portfolios held in equities will decrease. We also build in a 'margin of safety’ into our valuations.
Portfolio Risk
Consideration is given to sector and country diversification in portfolio construction as diversification is proven as the most logical and proven way to protect the total portfolio. We aim for lower volatility in the fund and monitor efficiency of risk/return performance by Sharpe Ratio and Sortino Ratio and make use of risk analytics tool Excerpt (EM Applications). These are only tools, however, and do not drive the investment process.
We have a full time risk analyst who provides reports to the fund managers on a weekly basis to ensure they are aware of both intended and unintended risks.