We use active risk management as an essential element in our strategy to preserve capital and to enhance long term returns. Our risk management process is designed to capture risk analytics, and mitigate against unacceptable loss by implementing the following principles:

1. Exposure Limits: We monitor and manage concentration as much as possible in any single source of risk whether that is a security, sector, industry, or theme. Quantitative analytics are used to understand the correlation and relative volatility between exposure categories in order to properly manage the risk profile within our clients portfolios.
2. Volatility Management: Volatility risk is the potential for large swings in asset prices to impact portfolio values over the short term.  We believe our value buy/sell discipline, even when executed within volatile markets, helps to reduce wide swings in security prices and portfolio value. Volatility between asset classes can also produce opportunities that can be managed through our tactical asset allocation process. Finally, currency markets have become increasingly volatile and we seek to reduce this source of risk through selective currency hedging for clients, where appropriate.
3. Liquidity: As a principle, we believe the ability of any security to be monetized back into cash can represent a significant risk to investment performance both in terms of price and timeliness. As a result, our security selection process limits liquidity risk on individual investment positions through minimum market capitalization and trading volume limits. In addition, our strategic asset allocation process ensures that a base level of liquidity always exists in a portfolio, and diversification from an industry, geographic and business-size perspective also enhances the overall level of portfolio liquidity.
4. Non-Discretionary Loss Limits: Non-discretionary loss limits are critical to our risk management process and are there to ensure no single position can destroy capital beyond a given tolerance level. This tolerance level is pre-defined and cannot be altered.  A preliminary loss limit eliminates further allocations of capital to the given position while the final loss limit initiates a mandatory closing of the investment position. In our view, this non-discretionary process removes emotion from risk management and improves overall loss mitigation by the investment management team.
5. Sensitivity Analysis: We use quantitative analytical tools to monitor and evaluate the sensitivity of our clients’ portfolios to a wide range of macroeconomic and market variables including the business cycle, interest rates and foreign exchange rates to name just a few. This analysis helps our investment management team optimize the risk profile and return characteristics of our clients’ portfolios and better understand the key variables influencing our overall investment performance.