Investment Management: A Science to Teach or an Art to Learn? by Frank J. Fabozzi & Sergio M. Focardi & Caroline Jonas

Author:Frank J. Fabozzi & Sergio M. Focardi & Caroline Jonas [Fabozzi, Frank J.]
Language: eng
Format: epub
ISBN: 9781934667743
Publisher: The CFA Institute Research Foundation
Published: 2014-05-16T00:00:00+00:00

Clearly, the notion of risk is being extended. Erik Valtonen, CEO of Zurich-based Blue Diamond Asset Management and former head of risk management and CIO at the Swedish buffer fund AP3, remarked, “The way risk management is applied is becoming more holistic: from narrow-minded number crunching to a broader view that includes issues like liquidity and operational risks.”

Saker Nusseibeh, CEO and head of investment at Hermes Fund Managers and chairman of the 300 Club,19 added a risk that needs to be taken into consideration: political risk. In the thought piece “Political Risk: The Impact on Investors” published by Hermes (2012), Dr. Nusseibeh noted that it has been at least two generations since investors actively looked at the problem of political risk in the context of developed markets. “They need to start,” he suggested and went on to explain,

What is clear is that we are now approaching an era when investment decisions cannot be made without incorporating political risk into the equation. The way we approach investments has to change. Long-embedded financial concepts, such as mean reversions or efficient market theory, are already lessening in importance. The investment world must wake up to the fact that we do not operate in a hermetically sealed financial system, we now live in a political economy. (pp. 4–5)

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