Risk Management and Assessment.

Risk assessment and management is another important role of investment management that must be done at all times.

All investments involve some form of uncertainty which may be caused by market changes, political surroundings, regulations or economic changes.
A host of advanced tools, models and analytical techniques help investment managers assess these risks, predict how these risks may affect portfolio performance and take preventive decisions to avoid losses.

This involves reviewing past price movements, economic factors, industry dynamics and macroeconomic events to forecast potential events.
The other risk management tool is position limits,
which are set and used to hedge instruments and to reassign assets in respect of the dynamism of the market. Investment managers help in the protection of the clients portfolios, to create a balance between development and safety, and to make sure that the investment targets are achieved in an orderly,
controlled and strategic manner, through continual observation and control of risks. Sound risk management enables investors to remain committed to long term objectives with confidence of overcoming short term uncertainty.

Asset Allocation

The asset allocation strategy is a process by which an investor allocates his money to different types of assets, such as equities,
fixed income, cash, and alternative investments, like a real estate or commodity.
This is a key role of investment management since the allocation plan directly and significantly influences portfolio returns and total risk exposure.
When planning an allocation strategy, investment managers take into account several factors including the financial objectives of the investor,
risk-taking, investment time span, and the prevailing market environment. e.g. a young long-horizon investor will be more likely to have a higher equity ratio,
a retiree more likely to focus on fixed-income investments to focus on stability, income and capital preservation.

Not only will a properly allocated asset base increase the likelihood of meeting the target returns,
but it will also have a reasonable structure in which to revise the portfolio as markets evolve,
financial goals evolve or risk aversions evolve. Success in long-term investments relies on strategic use of assets in a balanced approach to growth and risk management.