Global Investment review
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As the second edition of Global Investment Review goes to press, the tragic
events of September 11 still loom large in people’s minds - so large, in fact,
that it is hard to recall that the global economy showed signs of slipping
into recession before this grim milestone on the landscape.
Despite the feeling that the world has suddenly turned upside down, we
believe that it is important to recognise that there is no such thing as
‘normal’ investment conditions. Change is the order of life for investors.
That’s the first inviolable investment ‘law’.
It is natural to look for more constants in our turbulent world. We think
there are only two more: the places for governance and risk management in
successful investment.
With governance, the key principle is that how you take your investment
decisions is as important as what you do. Basically, the governance of
institutional funds has tended to evolve piece-meal and most funds are in need
of something like a ‘governance make-over’ to cope with their new challenges.
With risk, the problems of risk measurement are at tension with the
importance of risk management. Basically, risk ranks alongside return in
importance - if you find ways to reduce risk you can turn that risk into
higher returns.
We think risks and opportunities are changing in a way that calls for
funds to ask themselves the key question: Am I in the right
strategic mix to meet my investment goals?
As single digit returns look likely for equities and bonds going
forward, alternative assets look particularly attractive. The big
caveats here are the limited capacity of these markets and the
need for sound implementation. Which brings us back to
governance and risk.
Roger Urwin
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