Our Investment Approach
Investment Philosophy
Risk Process/Control
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Risk Process / Control

Generating good ideas is only one element of any successful investment process. It is equally important to incorporate those ideas into the portfolio in a risk-controlled manner. However, the concept of investment risk means different things to different people.

Many investment managers define investment risk in terms of volatility around a relevant market index or peer group benchmark. At Merrion Investment Managers, we believe that this can be too narrow a definition. There is little benefit in achieving a low volatility of returns relative to a peer group or benchmark return if the level of that return is significantly below the total potential return available in the market. Consequently, we define investment risk as the risk of failing to identify and capture this total potential return.

When constructing traditional market-oriented portfolios, we take account of both local and global benchmarks. However, in an increasingly global market, we are more concerned with cross-referencing our stock weighting against a global sectoral benchmark. This represents the wider global economy and the sources of return within it more accurately than any single regional benchmark.

In recent years, we have successfully managed a number of unconstrained portfolios. These are not referenced to any market index or benchmark. Instead, they have an absolute return focus. These portfolios are high risk in a conventional sense in that their return profile is very different from that of the overall equity market. They may also be highly concentrated in a relatively small number of stocks. However, in practical terms, they have been very effective in reducing market risk and protecting capital through the use of dynamic asset allocation between asset classes.

In both conventional and unconstrained portfolios, risk management is central to our investment process. Investment markets are increasingly dynamic. Merrion Investment Managers’ investment process and risk controls are structured to deliver consistent outperformance.