Without robust risk management in place, the potential to harvest risk premia is to an investor what “hitting the jackpot” is to the frequent and hopeful lotto player. With every dime invested, the prospects of delivering satisfactory outcomes become more likely whilst the downside risk gets heavily discounted. Though there may be a thrill from following this uninformed process, credible investment strategies rely on delivering long-term stable returns as opposed to ‘once in a lifetime’ jackpots. Furthermore, the best and most persistent way of harvesting risk premia and achieving long-term stable returns is ensuring that robust risk management is the bedrock of the investment process.
Without robust risk management in place, the potential to harvest risk premia is to an investor what “hitting the jackpot” is to the frequent and hopeful lotto player. With every dime invested, the prospects of delivering satisfactory outcomes become more likely whilst the downside risk gets heavily discounted. Though there may be a thrill from following this uninformed process, credible investment strategies rely on delivering long-term stable returns as opposed to ‘once in a lifetime’ jackpots. Furthermore, the best and most persistent way of harvesting risk premia and achieving long-term stable returns is ensuring that robust risk management is the bedrock of the investment process.
