As part of our risk allocation process we use risk budgets to ensure we allocate active risk consistently over baskets of investment opportunities. Risk budgets are the best means to ensure a single-portfolio focus for the whole team, rather than simply meeting an asset-class quota.
Within a Board-approved overall active risk budget for the Fund, various investment opportunities with similar underlying drivers are grouped together into baskets by the Guardians’ Investment Committee.
The investment opportunities in each basket have similar risk characteristics e.g. diversifiers, market pricing or asset pricing.
The overall risk budget is allocated by the Investment Committee across these baskets.
Teams of investment professionals monitor investment opportunities relating to a given basket, making risk allocation recommendations to the Chief Investment Officer and General Manager Portfolio Completion.
These risk allocation recommendations inform our investment and divestment activities.
Risk budgets help us assign capital judiciously, allowing investment professionals who are deeply familiar with investment opportunities to be closely involved in decision-making.
Performance is monitored by the Investment Committee and the Board.