Conventional wisdom and investment practice over the last 20 years have disproportionately focused on asset class returns and risk profiles. A sense of urgency is now needed to build more effective risk management solutions, argued Jan Straatman, Global CIO of Lombard Odier, at the CFA Institute Fifth Annual European Investment Conference held in Prague, 18–19 October 2012. Given that the range of modern asset classes has apparently failed to deliver the desired diversification effects promised by optimisers and mathematical techniques, Straatman believes that risk management at the portfolio level has been found to be negligent.
Straatman developed his premise by first explaining four “problems” the modern fund manager faces:
- Although there has been a proliferation of new asset classes in the last two decades, the globalisation of the capital markets through company expansion and orchestrated multinational monetary policy has reduced the diversification impact across asset allocation.