Risk Management: The Intelligent Pursuit of Risk

In most facets of life, we tend to associate risk with downsides: the risk of injury from slipping on ice; the risk of perishing in a plane crash; the risk of property damage from a flood. Risk, simply put, is something to be avoided. As investors, however, risk is something to be actively, yet intelligently, pursued. Striking the right balance of specific risk exposures—with the goal of increasing returns, both at the asset class and overall portfolio levels—can not only mean increased returns in favorable environments, but also limited losses during unfavorable ones.