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How much risk is too much risk? Hear more on June 3rd in NYC.

May 26, 2011

Everyone who works in the fund industry knows that there’s a trade-off between risk and return. You’ll earn only a modest return on your money market account, but it’s not likely that you’ll watch your account balance go down — unless you use your check writing privileges, of course. On the other hand, an emerging market stock investment offers the chance for substantial profits, though a substantial loss is an equally likely result.

Risk and reward don’t always get equal attention. In the boom years of the bull market, return was all that mattered. Investors didn’t seem to demand higher returns from stocks than they did from bonds,as they brushed off the substantially greater risks of equity ownership.

In the post credit-crisis world, however, risk is getting a lot more attention.  Investors have gravitated toward fixed income funds, despite their low yields, and have been hesitant to step back into stocks, no matter how attractive their recent returns.

In fact, risk has moved to the forefront of discussions within investment management firms. Companies that once had an informal approach to evaluating risk now have standing committees with written procedures — and a mandate to identify looming risks early, before it’s too late to do anything about them.

Firms are also thinking about risk very broadly. In the past, they might only have looked at risk within a fund, asking, for example, whether a particular emerging market fund had too large a position in frontier markets. Today, they’re talking about:

  1. Systemic risk. What big picture risks could affect the firm and its shareholders?
  2. Investment risk. Is a fund taking too much risk relative to shareholder expectations?
  3. Operational risk. Are there any operational bottlenecks that could prevent the firm from delivering on promises to its investors?
  4. Business continuity risk. How would the firm cope with a disaster, natural or otherwise?
  5. Regulatory risk. Does the firm have systems in place to ensure that it complies with all relevant regulations?

We’ll be talking about risk management in its many forms at the NICSA East Coast Regional Meeting in New York on Friday, June 3rd.

  • Keynote speaker Donald F. Donahue, Chairman and Chief Executive Officer of DTCC, will provide a broad overview in his remarks on “Re-inventing Risk Management: Opportunities and Challenges.”
  • Jonathan Sokobin, Acting Director of the Division of Risk, Strategy, and Financial Innovation, U.S. Securities and Exchange Commission, will share his insights on risk management and talk about the top initiatives of this newest division of the SEC.
  • You’ll have an opportunity to talk with independent fund directors to get their views of risk management and how to have a dialogue with your fund board about risk management.
  • Plus, you’ll hear the latest on cost basis reporting and regulation — and receive a star-studded tax update including a discussion of FATCA.

Complete program and registration information is available here.

Do you have questions for our speakers? Post them here, or send us an e-mail at

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