Risk control plays an all-important role in the investment process of FalcInvest. The key idea behind risk reduction is broad diversification over alternative investment styles, markets, instruments, counterparties, timeframes and investment horizons, etc.
In the alternative investment industry hedge funds often pursue opportunistic strategies and rarely provide full transparency to clients. It is paramount that FalcInvest Asset Management in its investment process adopts a conservative risk control approach.
Although past performance can provide valuable information about certain risk elements (like volatility) of individual investments, real risk is in our view the occurrence of something that has never happened before. Dealing with this kind of risk requires a great deal of knowledge of a large number of risk factors and experience in interpreting developments in the alternative investment industry.
As a natural consequence, risk control in our investment process is structured around both statistical measures as well as a qualitative understanding and analyses of the risk factors that can affect a given investment style.