Risk Management

At Player Fund International, we aim to get the highest possible return on our investments with the lowest possible risk. Our market risk is primarily determined by the composition of our benchmark portfolios and includes a number of factors including the fund’s share of equities, credit risk changes in fixed income investments, and movements in sub-fund and stock prices, exchange rates and interest rates.

To minimise these potential risks, our board, the Global Investment Committee and advisory boards continually identify, measure and manage systemic and non-systemic risks using various mathematical and statistical methods. These methods include:

This statistical risk management strategy, expressed as expected relative volatility (tracking error), places a limit on how much the fund is expected to deviate from the return on a benchmark folio. If, for example, there was an expected tracking error limit of 125 basis points (1.25%), the difference between the sub-fund return and the respective benchmark portfolio return is expected to exceed 1.25% in one out of three years. Ultimately, this measure uses historical prices to predict future market volatility. This allows us to maintain reasonable fund performance continuity utilising active management to buy and sell sub-funds in periods of normal or volatile market behaviour.

This method of risk management is used to supplement other methods including the Expected Tracking Error method and works to support Player International Fund’s risk spreading philosophy. It measures the concentration of investments in individual sub-funds where the level of risk is higher in a concentrated rather than diversified portfolio. When a sub-fund deviates from its benchmark index, concentration analysis allows us to explore the degree of overlap between the sub-fund and its benchmark index. If there’s a 100% overlap, it means that the sub-fund is carrying the same amount of risk as the benchmark.

How readily we can change our composition depends on our liquidity exposure and the size of our sub-fund investments relative to overall market turnover. The Allocation and Risk Advisory Board calculates and reports on the liquidity risk of Player International Fund, including recommended alternatives and special situation components.

The ability of the Player Fund active management to change its composition depends on its liquidity exposure. The size of the Player Fund’s sub fund investments relative to overall market turnover determines how quickly changes can be made. Actively managed Sub funds are invested in blue chip listed equities & high credit grade fixed income. The Allocation & Risk Advisory Board calculates & reports on the liquidity risk of the Player Fund including alternatives & special situations components.