Today, family of offices are invested in a wide range of increasingly more complex and diversified assets. As a result, there is a growing trend among family of offices that are now adopting a model that is similar to what institutional investors such as pensions, endowments and foundations do for risk management. These family of offices have chosen to take a more formal and institutional-quality approach to risk management. By doing so, a family of office is not only better fulfilling its fiduciary responsibilities and obligations to family stakeholders but also creating the basis for more superior, repeatable and sustainable investment management results through economic and market cycles both good and bad.
Typically, an “institutional-quality” approach for risk management is characterized by having a risk management framework that includes four core elements, namely:
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