SWFs Need to Radically Revamp Risk Management Process Now

Sovereign Wealth Funds (SWFs) have lost hundreds of billions of $ ever since the Coronacrisis gathered momentum, beginning March. I believe it the largest destruction of accumulated citizens wealth in history. Having advised multiple SWFs I am acutely cognizant that each has its own specificity, governance, asset allocations, risk levels and special objectives. A Fund’s institutional framework too has great influence over managers, both internal and external, and therefore has an impact on its management and returns. A SWF’s legal status also is a key decision point,  since it impacts the fund’s form, governance, links between actors and the applicable law.

I am of the view that recent market events highlight the importance of managing risk holistically even more so.  I draw attention to five issues in this visual.

Sovereign Wealth Funds - risk process

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech ActiveAllocator.com, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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