Risk Management

Risk Management is at the core of Heirloom’s investment strategy and process. Below are some critical differences to Heirloom’s approach versus other investment managers/advisors.

When analyzing investments, we focus on understanding the underlying drivers of investment returns – this requires a forward and backward looking analysis – which gives us a greater understanding of, and ability to manage, risk exposures.

Risk is Integrated into Investment Decision Making

  • Understanding and evaluating risk is a central component and core to Heirloom’s investment process, versus a secondary process or series of constraints used by our managers.
  • Portfolios are assessed and viewed as a whole, rather than individual investments, in order to balance risk.

Focused on the future in addition to the Past

  • Many managers use backward-looking risk assessment tools such as correlations, betas, volatility, etc. which the 2008 crisis showed to be incomplete.
  • Heirloom uses backward-look assessments as helpful tools, but takes the analysis a step further, with the return driver analysis identifying what the risk exposures will be going forward, allowing for proactive risk mitigation.

Sophisticated Portfolio Management Approach to Risk

  • Many asset allocators use very simple heuristics (such as asset class exposures) to estimate the risk of a portfolio, but miss the “devil in the details”.
  • Heirloom’s return driver framework allows for a more sophisticated aggregation of first and second order risk exposures across the portfolio, and allows for the appropriate hedging.