Portfolio management all about risk

Keeping in the game is the goal for portfolio managers, says one industry expert, and a big part of that is understanding risk

“Successful portfolio managers tend to be very good risk managers,” says Richard B. Weed, senior vice president investment management, head of systematic strategies, Mackenzie Investments, “you have to understand the risks in your portfolio – and almost without fail whenever I speak to my colleagues who manage hedge funds, the first thing they say is ‘I’m a risk manager.’”

Risk management allows you to “keep in the game,” Weed told WP.

“It allows you to keep playing; because if you don’t manage your risk and you blow the portfolio up, you have nothing left to manage – and you’ve lost 70% of your assets.”

Given how much risk there is in the world at the moment because of the sheer amount of information that is flowing so much more freely compared to 10 years ago, “you have to be a very good risk manager and understand what bets your portfolio is making, and where the bets are being made.”

Weed’s investment process is what he calls a “systematic investment process,” adding that the Mackenzie approach is two distinct sources of stock selection. The first source is fundamental stock selection. We have a stable of analysts and portfolio managers who go out and look at stocks, and they select these stocks based on fundamental research.

“Everything we look at, there’s always a framework in how we look at things. We try not to have any emotions when we look at things,” says Weed. “It is all based on analysis; upsides and downsides.”

Mackenzie recently announced the formation of a new Canadian Growth investment boutique led by industry veteran Dina DeGeer, who together with David Arpin and Shah Khan will manage over $1 billion in client assets.

With more than 50 years of combined expertise, this Lipper award-winning team previously from Bluewater Investment Management Inc. joined Mackenzie Investments effective earlier this month.