In an appropriately timed session at CMSF 2020’s virtual conference, IFM Investors sponsored the investment sessions, available last week, including ‘The Changing Face of Risk Governance’. It is obvious risk is complex. It would be good if Tim Wilson downloads it.
Chaired by David Carruthers, principal consultant at Frontier Advisors, the session showed how funds adapted to the demand for increased transparency and control. Caruthers said that with risks, the important thing is to understand them and not be surprised by them. It was how you dealt with them that was important, he said.
His two panellists were John Livanas, the chief executive of NSW’s State Super (SAS Trustee Corporation), an asset owner, and Raewyn Williams, the managing director, research, at Parametric Australasia, a fund manager. They both have strong academic backgrounds.
Livanas drew the distinction between ‘risk’ and ‘compliance’ for big funds. “They are completely different concepts,” he said. “Compliance is the adherence to a certain set of rules that reflect the needs of an organisation and the processes that have proven useful. Risk is the imagining of a future for the organisation in all its guises and then trying to work through the types of strategies you may need to respond to them. Where we are right now is a testament to the future being unknowable. They need a different set of skills.”
Williams, who is also a former asset consultant, said that investment managers tended to start with compliance as a “hygiene” element. “You have to get mandate rules such as things like tracking error restrictions, the investment universe and ESG guidelines right. While you may call that compliance, we think of it as a risk that you have to manage in terms of the mandate.
She said: “Of course, investment risk is much broader than that… We shouldn’t be scared of risks. It’s how we target them and how we are compensated for taking that are important.”
Livanas pointed out that during the current pandemic, it was not just investment risk that had been manifested. A big fund had to be in a position to respond to a huge amount of member calls, for instance, he said.
CMSF 2020 is a mix of downloadable sessions and live sessions. The program details are as numerous as the traditional live event. And you can attend two or three which would have taken place at the same time. And it’s only $99 for non-members. For information: go to