Press release
Northern Trust Asset Management’s Risk Report Highlights Drivers of Unexpected Portfolio Results
Analysis spans six years and comprises nearly 300 institutional portfolios totaling more than US$250 billion, plus 1,300+ investment strategies CHICAGO &
About this update from Northern Trust Corporation
[{"type":"text","content":"\nAnalysis spans six years and comprises nearly 300 institutional portfolios totaling more than US$250 billion, plus 1,300+ investment strategies \n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nNorthern Trust Asset Management (NTAM), a leading global investment manager with nearly $1 trillion in assets under management, released today its 2022 edition of “The Risk Report,” an aggregated global analysis of 280 institutional equity portfolios which reveals six common drivers of unintended investment results.\n\nAs an investment manager that employs a quantitative risk-aware approach, NTAM regularly partners with institutional investors and their consultants to provide them with a distinct analysis of underlying risk components impacting their portfolios’ ability to achieve intended outcomes.\n\nThe analyses at the heart of “The Risk Report” identifies compensated and uncompensated risks in portfolios. This enables NTAM to recommend adjustments needed and is consistent with NTAM’s core philosophy: investors should get paid for the risks they take—in all market environments and in any investment strategy.\n\nActive risk is necessary to generate excess returns, but not all risks are created equally. Some have been historically proven to generate excess returns over long periods (compensated risks) and some have not (uncompensated risks).\n\n“In the current market environment, when investors are struggling with underperformance, outcomes that differ from intended results often cause confusion about how various—and often hidden—risks are impacting their portfolios,” said Michael Hunstad, Chief Investment Officer for Global Equities at Northern Trust Asset Management. “The number one question that institutions have when their portfolios don’t deliver expected outcomes is ‘why?’ By aggregating years of analysis in 'The Risk Report,' we are able to shed light on the causes.”\n\nThe 2022 edition, like its 2020 predecessor, surfaces six key drivers of unexpected portfolio results. Those include portfolio exposure to uncompensated risks and the performance-hindering “cancellation effect,” which occurs when, in attempting to target specific risks and outcomes, different asset managers unwittingly select investments that “cancel” each other out, thereby diluting risk compensation.\n\nDespite a vastly different market environment from 2020, the fact ...