Focused management of overall portfolio risks
Institutional investors have to juggle the demands of long-term capital allocation with short-term reporting and accounting periods. Without adequate risk management, market fluctuations that exceed the usual swings can have a severely adverse impact on the investment portfolio and the balance sheet. Investors also have to cope with persistently low interest rates. The result is that the allocation to asset classes with greater return potential has to be increased in order to meet the investment targets. Overall portfolio risks therefore tend to increase accordingly.
With our strategies we have developed professional solutions for overcoming these conflicts that are tailored to each separate asset class.
Solutions for the multi-asset asset class
A high degree of diversification forms a good basis, but should be supplemented by stronger safety mechanisms. With our value preservation solutions we offer investors the opportunity to gain exposure to long-term developments on capital markets and at the same time to stay within previously defined risk parameters.
Our value preservation strategy can be integrated into many Berenberg investment solutions and can also be added to any multi-asset portfolio (structured as a master fund or individual institutional fund) as an overlay solution.
|Client specific risk and loss limitation||Strategy is exposed to general market risks - e.g. interest rate, price and currency fluctuations|
|Cost efficient protection||No guarantee can be provided that the objectives will be achieved|
|Significant reduction of cash-lock risk and cash-lock duration||Overnight risks can impact performance|
|Increase of expected return through more offensive portfolio allocation||The implementation of overlay strategies results in additional costs that can affect performance - e.g. opportunity and transaction costs|
A DEPENDABLE SAFETY NET
With our value preservation solutions we offer investors the opportunity to gain exposure to long-term developments on capital markets and at the same time to stay within previously defined risk parameters. The limits can be set as static or adjusted to move dynamically according to market developments.
Our multi-stage process puts particular emphasis on reducing the risk and duration of a cash lock. To do so we identify periods of exceptional market stress and reduce risks at an early stage. This enables us to absorb severe capital market movements that occur at the beginning of a reporting period and still keep a risk budget available for the remainder of the period.
Solutions for the equities asset class
We offer professional solutions for the different challenges posed by stock markets, which can significantly reduce the risk of loss while maintaining a large proportion of the potential return from equities and releasing regulatory capital at the same time.
Our strategy can be implemented in an existing share portfolio or combined with the Berenberg equities strategies.
|Enhanced risk return profile||Strategy is exposed to general market risks - e.g. interest rate, price and currency fluctuations|
|Regulatory capital charge relief||Relief of the Solvency Capital Requirement cannot be guaranteed|
|Reduction of short and medium-term drawdowns and overall volatility||Additional costs may occur and affect performance|
MORE EQUITIES WITH LIMITED RISK
Our strategy combines equities with options and so offers a cost-effective strategy that can reduce the risk of loss substantially, while maintaining a large part of the positive chances of return on shares. The hedging structure, consisting of selling call options and buying put options, makes it possible to gain exposure to equities markets while limiting downside potential – especially in the event of more serious market disruption. By deliberately optimising the relevant risk indicators it is also possible to free up regulatory capital, in addition to limiting losses. Depending on how it is structured, the strategy can also be used as an alternative to fixed income securities and as an additional allocation to a multi-asset portfolio.
Yannick Lahmann joined Berenberg in December 2017 as a product specialist. In this role, he is the first contact person for product and client-specific matters for all risk focused and portfolio protection strategies. After his apprenticeship at Hamburger Sparkasse, he worked in several positions in the advisory business and most recently as an investment advisor. Following his banking apprenticeship, he studied at the Frankfurt School of Finance and Management and graduated with a degree in banking management (FS) in 2016.