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Alternative Market Briefing

Institutional investors expand risk management, asset-raisers should provide more strategy details

Tuesday, December 15, 2009

From Kirsten Bischoff, Opalesque New York:

A newly published survey by global risk and performance firm MSCI Barra indicated that for the first time, institutional investors are taking serious steps to increase the oversight of in-house risk management teams. Commitment to this area (which includes budgeting for the hiring of more senior risk management professionals) is strong enough to be indicative of a cultural shift within institutional investors' approach to portfolio management.

According to the survey, "The Future of Market Risk Management: A Global Survey of Institutional Investors" currently only 10% of risk managers have veto authority over portfolio positions, and while 30% of risk managers report to an investment committee, they do not have direct authority over investment decisions.

However, cycling out of the financial crisis, institutions are voicing a real commitment to hiring risk professionals with previous portfolio management experience and giving them real input into the portfolio management team. "Historically, in the past risk professionals may have been strong in mass and statistics, but may not always have had a lot of investment expertise, and therefore were often seen as junior to the investment professionals who made the money in good times," Frank Nielsen, Executive Director ......................

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