Risk management and controls

Risk management and control are important for all investment funds. Within GARS, there is a particular requirement to understand the impact of volatility on our derivative positions and how all our investments interact within the Fund.

In managing GARS, we do not use conventional asset allocation limits, which are inflexible. Instead, we look at the individual contribution of each strategy to GARS’ total investment risk. This ensures that all investment strategies are monitored on a consistent basis. We set limits to ensure that no individual strategy, e.g. exposure to UK equities, or group of strategies, e.g. exposure to equities generally, dominates its risk profile. As such, the risk limits ensure the portfolio always holds a diversified set of investment risks no matter how strong our conviction may be on any one asset class.

This approach gives three main benefits:

• We only invest where we clearly understand the risks
• By understanding how individual strategy risks interact, we can build a truly diversified portfolio
• Key risks can be clearly communicated to investors.