Insights

Managing Downside Risk

12/21/2015

Trevor Leydon
Head of Investment Risk and Portfolio Construction
Aviva Investors

Risk management is at the core of Aviva Investors’ multi-strategy investment approach, which aims to shield investors and to deliver consistent outcomes, irrespective of market conditions. We do this by targeting strategies that we believe can offset potential losses borne by the rest of the portfolio as a result of “tail risks”—risks with a low probability but potentially large effect on portfolio valuations—as well as more standard market volatility.

Crucial to managing risk exposures is how we expect strategies to interact with each other across a range of market conditions. Our portfolios consist of three types of strategies, each with a distinct role: 1) “market” strategies aim to generate returns from markets that perform as expected; 2) “opportunistic” strategies seek to exploit asset mispricing opportunities; and 3) “risk-reducing” strategies aim to support performance when markets do not behave as anticipated. The goal is to combine these strategies in such a way that we can deliver equity-like returns with less than half the volatility.

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Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.