Returning To Risk Looks At The Reasons Why Clients May Be Choosing To Re-Risk Their Investment Portfolios.DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c70475) has announced the addition of "Returning To Risk" to their offering. Introduction Returning to risk looks at the reasons why clients may be choosing to re-risk their investment portfolios, and the strategies being employed by their investment managers to manage the risk in their portfolios. It also looks at the effect of a turbulent market on attitudes towards investment risk. Scope Includes data from European and Global markets from 2006 and 2007. Analysis of investment managers perspectives in Europe and US. Large scale secondary research taking information from Europe and US with company specific references. Highlights A lack of understanding among investors about what risk is can lead them to conclude that stock market losses in certain areas means they should reduce their risk tolerance Risk Tolerance The degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio. Notes: An investor's risk tolerance varies according to age, income requirements, financial goals, etc. . However, many investment managers take the view that a time of unrest in the markets is one of the better times to explore new areas of investment and a new approach to risk. Contacting clients is vital at times of uncertainty. Giving them an understanding of how current volatility is affecting the value of their own portfolio, and what defensive measures can be taken to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. any
future losses that might yet result from it, helps to retain client
confidence. Going forward, wealth managers are becoming more aware of
the need to introduce more complex processes into the risk management
aspect of their businesses, however many are still developing a more
holistic approach holistic approach A term used in alternative health for a philosophical approach to health care, in which the entire Pt is evaluated and treated. See Alternative medicine, Holistic medicine. to wealth management that is better suited to
incorporating a proper approach to risk, as outlined in the previous
chapter.
Reasons to Purchase Gain insight into why investors have been considering a return to risk. Understand the effect that market turbulence turbulence, state of violent or agitated behavior in a fluid. Turbulent behavior is characteristic of systems of large numbers of particles, and its unpredictability and randomness has long thwarted attempts to fully understand it, even with such powerful tools as has on investors views of risk and the effect this has on investment trends. Develop strategies to appropriately manage clients to prevent a loss of confidence during market instability. Contents: OUR VIEW CATALYST SUMMARY THE RISK LEVEL AN INVESTOR IS COMFORTABLE WITH OFTEN REFLECTS EXTERNAL CIRCUMSTANCES -Many investors do not equate e·quate v. e·quat·ed, e·quat·ing, e·quates v.tr. 1. To make equal or equivalent. 2. To reduce to a standard or an average; equalize. 3. greater rewards with greater risk THE 2002 BEAR MARKET LED TO A SWATHE swathe 1 tr.v. swathed, swath·ing, swathes 1. To wrap or bind with or as if with bandages. 2. To enfold or constrict. n. A wrapping, binding, or bandage. OF DERISKING AMONGST HIGH NET WORTH CLIENTS -Investors are regularly "spooked" by well-publicized signs of stock market volatility or potential economic problems -Investors began to question their existing risk profile and demand more control over their investments -The rise of diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and low risk products signalled a desire among investors to modulate To insert a data signal into a carrier wave or direct current. See modulation. risk and exposure to a single market WITHIN THE INDUSTRY A RETURN TO RISK WAS NOTED AT THE BEGINNING OF 2007 -Highly-leveraged, high-performance investments have spurred clients away from "fear" and into "greed Greed See also Stinginess. Almayer’s Folly lust for gold leads to decline. [Br. Lit.: Almayer’s Folly] Alonso Shakespearean symbol of avarice. [Br. Lit. " -Investors perception of what is high risk often differs from reality In some quarters clients have been returning to risk for longer THE CURRENT MARKET TURBULENCE HIGHLIGHTS THE DANGERS OF A HIGH RISK PROFILE -Times of crisis have a significant effect on the market for certain asset classes -Investment managers must take steps to ensure that the effect of future market shocks is mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. A MODERN APPROACH TO INCREASED RISK NEED NOT PUT INVESTORS AT THE MERCY OF THE MARKETS -Active management focused on risk can be used both to take advantage of high risk and reduce exposure when necessary -Higher risk tolerance in uncertain times can be made to benefit clients in the longer term -Diversifying risk, or investing in different types of risk, offer sophisticated versions of a high risk profile RISK MANAGEMENT FOR PRIVATE CLIENTS REQUIRES A SOPHISTICATED INVESTMENT MANAGEMENT PROCESS -Many private banks are improving their processes already APPENDIX -Definitions -Investor -Investment manager -Methodology -Further reading -Ask the analyst -Our consulting -Disclaimer List of Tables Table 1: Worldwide Mutual Fund Net Sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , 2005 - Q1 2007 Table 2: Cumulative European Equity Fund Sales and Net Sales, 2005-2007, EURm Table 3: Annual European Equity Fund Sales Growth Rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. (Projected for 2007) EURm Table 4: Net Assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. of European Guaranteed Funds, Q4 2006-Q4 2007, EURm List of Figures Figure 1: Sales and Redemptions of Equity Funds in Europe, 2005 - 2007e Figure 2: Net Assets of European Guaranteed Funds, Q4 2006-Q4 2007, EURm Figure 3: The key components of a smart risk strategy all work to ensure risk is appropriately controlled For more information visit http://www.researchandmarkets.com/reports/c70475 Source: Datamonitor |
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