Callan Study: Managing Risk After Market Collapse.SAN FRANCISCO San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden -- Callan Associates today released The Odyssey of Risk: Find your Compass, an essay authored by Senior Vice President and Director of Hedge Fund hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" Research, Jim McKee. Developed for institutional clients, the paper illustrates how fund sponsors can manage portfolio risk after enduring the liquidity crisis and market collapse of 2008. McKee looks back at prior financial crises and observes that the recurring pattern of investor complacency -- combined with greed -- concludes with fear and ruin. With each new chapter of risk taking, investors pledge to cast off bad habits bad habit Unhealthy habit Clinical medicine A patterned behavior regarded as detrimental to physical or mental health, which is often linked to a lack of self-control. Cf Good habit. and erect new defenses in risk management, but often fail to protect themselves as the new round of investment opportunities lure buyers into the turbulent areas of risk. Based on past investment mistakes, Callan highlights in the paper what it considers to be the Top 10 lessons learned for managing risks and provides common sense guidelines frequently forgotten by investors when markets get brisk. Each lesson outlines next steps institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. may want to take to achieve their long-term investment objectives. "Cycles of greed and fear  The of this article or section may be compromised by "weasel words".You can help Wikipedia by removing weasel words. provide compelling case studies. Unfortunately, generations of investors come and go, often leaving the next trail-blazing investor to learn these humbling lessons of risk alone," said McKee. Some of the topics covered in the study include: liquidity, risk diversification, leverage, securities lending Securities Lending When a brokerage lends securities owned by its clients to short sellers. Notes: This allows brokers to create additional revenue (commissions) on the short sale transaction. , fixed income and bond portfolios, the illiquidity premium, alpha, rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting and CIO CIO: see American Federation of Labor and Congress of Industrial Organizations. (Chief Information Officer) The executive officer in charge of information processing in an organization. and Board decisions. "I hope this study will inspire investors -- particularly the stewards of other people's money -- to reflect on last year's experience and apply these lessons to their own investment policies and guidelines for the benefit of future generations," said McKee. The entire study can be viewed on the Callan Web site at www.callan.com. About Callan Associates Founded in 1973, Callan Associates is one of the largest independently-owned investment consulting firms in the country. Headquartered in San Francisco, Calif., the firm provides research, education, decision support and advice to a broad array of institutional investors through five distinct lines of business: Fund Sponsor Consulting, Independent Adviser Group, Institutional Consulting Group, Callan Investments Institute and the Trust Advisory Group. Callan employs more than 160 people and maintains four regional offices located in Denver, Chicago, Atlanta and Florham Park, NJ. For more information, visit www.callan.com. Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6078377&lang=en |
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