Investment risk: Insights from Barclay Simpson

Investment risk management is in a constant state of change. In the last three years we have placed over 50 investment risk professionals in Asset Managers and Hedge Funds. Most clients operate in a state of flux seeking to be more efficient, improve their value add whilst satisfying regulators and investors. 

In short – it is difficult to describe investment risk as a function due to variation of a theme.

Types of investment risk structures

Unlike in the big banks who may have risk management structures which are often alike, the buy side operates on a far smaller scale with greater tenure and less movement. There is less opportunity to learn from one organisation to another.

Today there are three broad approaches to investment risk. 

1) Hedge Fund risk management reporting to a 1st line of defence (LOD)/in-business function but having 2nd line oversight responsibilities.

2) Asset Manager 1st LOD in-business risk management team responsible for portfolio construction and pre-trade analytics in addition to a separate 2nd LOD 

3) Asset Manager with only a 2nd LOD team 

As exceptions to the majority, there are asset managers which operate a 2nd line of defence only but with responsibility for portfolio construction and pre-trade analytics. In addition, there are some firms which hold multiple investment risk teams, splitting out reporting.

Generally speaking, most candidates aspire to operate in a largely value-add capacity and wish to report into the 1st line of defence. Similarly, the majority of clients strive to operate on a value-add basis working closely with the fund managers to support their understanding and appreciation for risk management whilst ensuring a form of independent risk oversight.

The challenge to this is a combination of; lack of data, poor infrastructure, required regulatory reporting and education about the value of risk. The solution: either recruit to work on this yourself (Option 1 & 2) or hire another company to do it for you, or a hybrid approach (option 3).

Building your permanent or agile investment risk management team

At Barclay Simpson we seek to provide a full-service solution to your challenges:

1. Permanent Investment Risk Recruitment 
2. Interim Investment Risk Recruitment (Daily Rate or Fixed Term Contract)
3. External consultancy supported in house by sister recruitment company with dedicated recruitment expertise for Investment Risk
4. Market mapping and bespoke competitor analysis on company structures
5. Compensation analysis and benchmarking

When you’re looking to build and secure your organisation’s investment risk management capability, Barclay Simpson can help you quickly build a technically proficient multi-skilled risk management function and team either on a permanent or contract basis.