Gwyn Roberts

26/10/2011 Author: Gwyn Roberts

Editor's view: 26 October 2011

Hedge fund CIOs are the ultimate in risk managers. Ironically, such is their mastery that many are demonstrating renewed chops in this area by deferring to a higher risk power: the CRO.

Chief risk officers are assuming new responsibility at funds, particularly as businesses buffeted by wildly unpredictable markets look to mitigate losses and prepare for future events. Those firms without a full-time CRO – according to a recruitment consultant spoken to by HFMWeek – are conducting searches, while the old CRO position at many firms has been ‘built-out’.

Gone are the days when the CRO fulfilled just a reporting function. Now they are closing out trades and assuming veto rights, while many have been placed right at the heart of funds’ decision-making process.

This development is telling. Margins are being squeezed, but still reserves are being piled into risk as investors push for a ‘risk full-timer’ and CIOs come to the terms with the fact that they are not omnipotent.

This means that funds should be better prepared for the worst. Rather than reactive, many funds are now stress-testing; scenario-planning against the black swans, grey swans and off-white swans that have become a daily part of the financial system.

In essence we are all risk managers, but giving greater risk management powers to a single individual or unit will help to negotiate choppy waters, satisfy investors and allow PMs and CIOs to get on with the business of making money.  

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