40+ Investment Risks (2019)

Investment Risks

Risks Associated with Assets and Investments

Money market investments are not risk-free. Investments in government or corporate debt in emerging markets tend to involve higher risks than in developed countries. In this blog, we explain 40+ Investment Risks. The following risks may all be encountered:


a) Counterparty Risk (Default Risk)

Counterparty risk can be mitigated by careful selection and diversification of borrowers, and a high credit rating requirement. Because of its structure, an investment in a money market fund ensures greater diversification than a fiduciary deposit invested in a single bank.


b) Liquidity Risk

This risk essentially concerns only fixed-term fiduciary investments, as money market funds are very liquid. A fiduciary investment subject to 48 hours' notice is obviously very liquid also. Short maturity instruments limit this risk for investors.


c) Interest Rate Risk

Investors often think that quality money market instruments are risk-free, forgetting that they bear the risk of interest rate fluctuation, which can be significant.


Every time a fiduciary deposit is renewed, there is a risk it will be reinvested at a different interest rate, which may be lower than the previous rate. We are referring here to short-term rates, i.e., under 12 months.


When interest rates are rising, short-term fiduciary deposits are preferable as they are quick to take advantage of any new rate rises, unlike money market funds that are slow to adjust to new rates.


Conversely, when rates are falling or expected to fall, it is best to make a longer-term fiduciary deposit, and then to favor money market funds. These are less sensitive to falling interest rates, integrating rate changes more slowly than fiduciary investments.


Money market funds are invested in instruments with a longer maturity (though under 12 months), meaning they can benefit from rates that have been fixed for a longer period.


d) Inflation Risk

As previously mentioned, returns offered by money market investments usually only just cover inflation in the long term. Inflation can, therefore, reduce the future value of the investment.


This risk can be reduced by investing in other asset classes, with a view to diversification. The proportion of money market investments will obviously depend on the investor's risk profile. It will be larger for conservative portfolios and very low for more dynamic profiles.


e) Currency Risk

When denominated in currencies other than the reference currency, fiduciary deposits or money market funds represent an additional risk, as the currency risk borne by investors can be significant.


Investors often hope to take advantage of a higher interest rate in a foreign currency, but frequently forget that the conversion of these funds into the reference currency can ultimately lead to a capital loss.


Exchange rate movements can, in fact, be very violent and affect investments. Therefore, large money market investments in a foreign currency should be avoided.


However, a need for liquidity in several currencies may justify money market investments in different currencies.


In other cases, investors can either limit themselves to fiduciary investments in their reference currency, or hedge against the negative effects of exchange rate fluctuations by using forward currency contracts, for example. This will be looked at in more detail later on.


Our Advice

Regarding money market investments, we recommend:

  1. focusing on borrower quality;
  2. taking the direction of short-term interest rates into account; favoring investments in the reference currency.


Risks Associated with Bonds

a) Default Risk Associated with Bonds

This risk relates to the quality of the borrower and its ability to meet its financial commitments, i.e., to pay coupons and/or repay the borrowed amount. The bankruptcy of the borrower results in the loss of all or part of the capital invested.


However, the position of creditors is preferable to that of shareholders. Regular bond debt is paid first, followed by “subordinated” debt, and only if there is anything left over will shareholders receive a liquidation dividend.


This risk can be mitigated by investing in high-quality debt, such as government bonds, favoring countries with solid finances. It is also possible to hedge against such a risk by buying CDSs (Credit Default Swaps).


For the payment of a premium, this derivative protects the holder against issuer default, such as bankruptcy or moratorium.


The event giving rise to payment must be clearly specified in the contract between the buyer and seller. The amount of the premium depends on the issuer's credit quality and its future development.


In this case, the default risk is transferred from the buyer to the seller of the CDS. “Trends in CDS prices are a suitable instrument for measuring the perception of risk on financial markets.”


b) Risk Associated with the Type of Issue and Risk of Early Termination. The type of debt being issued also represents a risk for investors. Senior debt offers better protection than subordinated (junior) debt that may be assimilated to capital.


In case of bankruptcy, creditors of unsubordinated debt have priority over holders of a subordinated bond, who is only entitled to repayment of the debt once the other (priority) creditors have been repaid.


Stockholders only have a claim on the company's residual equity. Subordinated bonds, being callable, also carry the risk of early termination.


As we have seen, an embedded call option is a reinvestment risk for investors, who could be forced to reinvest at a lower rate. For this reason, the price of these bonds is lower than that of regular bonds.


It is difficult to hedge against these risks, apart from avoiding a certain type of issue and only considering regular, unsubordinated bonds.


c) Liquidity Risk Associated with Bonds

Depending on the size of the loan and the levels of supply and demand, the price of an issue can be particularly sensitive to a lack of liquidity in the secondary market.


Therefore, investors may risk not being able to sell their bonds quickly or at a good price if demand is weak or if the spread (gap between the purchase price and the sale price) is significant.


Once again, it is difficult for investors to hedge against this risk, but an examination of the size of the issue and of prior market liquidity conditions for the type of bonds in question helps limit this risk.


In practice, an issue of over 500 million euros is generally considered to be adequately liquid. The spread also provides a good indication of liquidity.


d) Rating Risk Associated with Bonds

A rating drop will negatively influence the price of bonds, because of the lower debt quality implied by the new rating. Investors can hedge against this risk through careful monitoring of a bond issue's rating. For example, comments made by rating agencies, such as “negative credit watch”, must be taken into account.


Furthermore, it is worth noting that there are often constraints in management contracts that prohibit investments below BBB (investment grade level). Consequently, a credit rating downgrade—from BBB to BB for example—can trigger a rush to sell on the market, further precipitating the downward price movement.


e) Interest Rate Risk (Price Risk and Reinvestment Risk)

Interest rate variations influence both fixed-rate bond prices and the reinvestment rate of coupons, but with the opposite effect. When rates drop, coupons are reinvested at a lower rate, whereas the price of the bond itself rises.


Conversely, when rates rise, coupons are reinvested at a higher rate, but the price of the bond falls.


Before buying a bond, investors need to find out its yield to maturity, which is a good estimation of the bond's annual return assuming that it is held to maturity and rates do not change.


If investors want to sell before maturity, they run the risk of having to sell at a loss if interest rates rise in the future. If they keep it, they have to accept price fluctuations. Therefore, the shorter the maturity, the lower the risk. However, exposure to price risk can be limited in several ways.


i) Approach According to Context

We can distinguish two main situations and determine the appropriate approach for each, taking into account the term structure of interest rates. “Exact” positioning in terms of maturity will depend on the expected evolution of the yield curve (flat, normal or inverted yield curve).


The environment of rising interest rates:

As stated earlier, when interest rates rise, bond prices fall. So, if this scenario is anticipated, it is better to buy short-term bonds which are less sensitive to interest rate variations due to their low duration. This will attenuate the drop in bond prices.


As soon as the rise is over and rates have stabilized, investors should switch to long-term bonds to lock in the higher returns and protect themselves against any future fall in interest rates.


Indeed, if rates subsequently drop, the price of these bonds will rise due to the greater appreciation of long-term bonds, which have a higher duration. However, coupons will be reinvested at a lower rate.


The environment of falling interest rates:

We have seen that when interest rates fall, bond prices rise. Long-term bonds are preferable when such a scenario is expected, as their higher duration means they are more sensitive to interest rate variations. This will improve the bond's price appreciation.


As soon as the fall is over and rates have stabilized, investors should switch to short-term bonds so as not to be locked in for too long a period in case of future rates rise.


Moreover, a subsequent rise in interest rates will result in a fall in bond prices, but short-term bonds will suffer less from this depreciation due to their lower duration.


ii) Approach According to the Hedge Ratio

Exposure to price risk can be further limited by using what is called a hedge ratio. Using the duration of a hedging instrument for long-term interest rates, it is possible to calculate the amount of the instrument needed to hedge a bond portfolio. A bond futures contract or an interest rate swap can then be used.


The duration of a bond is a weighted average of successive interim maturities and final redemption. In other words, it represents the time it will take investors to recover their initial investment, considering the bond's purchase price, the coupon, its maturity and, finally, interest rates.


A higher time to maturity, a lower coupon rate and a lower yield to maturity all mean a higher duration. Modified duration gives the sensitivity of the bond's price to interest rate movements.


The aim of this hedging strategy is to bring the portfolio's overall modified duration to zero, thereby protecting it against the influence of interest rate changes on prices.


For a given bond position with a precise modified duration, it is simply necessary to calculate the number of futures contracts to be sold11 to bring this modified duration to zero.


Therefore, if rates were to rise, the overall value of the portfolio would change very little if at all, as the decline in the bond's price would be compensated by the gain made on the sale of the futures contracts.


This strategy is valid in the short term, but in the long term, the hedge must be adjusted according to interest rate movements or the change in modified duration, not to mention the cost of the hedge.


iii) Use of Options as a Hedging Strategy

A strategy adapted to the context of interest rate trends reduces this risk substantially. Investors can also make use of “caps” or “floors”, which allow them to hedge against rates increases or decreases respectively.


When interest rates are expected to rise, investors can buy a “cap” (interest rate call option) to hedge against rates rising above a certain level (strike price). If this threshold is passed, the buyer receives an amount corresponding to the difference between the observed rate and the strike price.


This protection is often offered in conjunction with floating mortgage rates, where the borrower benefits from falls in interest rates but risks having to suffer higher interest rates in the future.


Where a decline in interest rates is expected, a “floor” (interest rate put option) may be used, giving protection when interest rates fall below a certain level.


The holder of floating-rate debt securities who uses a “floor” will be paid an amount corresponding to the difference between the strike price (precisely defined level) and the observed rate at the moment of coupon payment.


iv) Immunization Strategy

In order to hedge against both price risk and reinvestment risk—“immunizing” against these two opposite effects—a so-called immunization strategy can be adapted to compensate for each.


While a hedging strategy aims to eliminate price sensitivity by selling a certain number of derivatives to bring the duration to zero, immunization aims to immunize the expected return for a given period against interest rate fluctuations.


Of course, there is an investment that guarantees a predetermined expected return for a given period: the zero-coupon bond. Most bonds do pay coupons, however, meaning that they are exposed to reinvestment risk.


To set up this strategy, a bond should be chosen whose duration corresponds to the investor's time horizon, in order to protect the underlying bond against any fluctuation until the next coupon date.


Consequently, the portfolio must be reconfigured just after the coupon date, so that the portfolio duration is kept in line with the residual time horizon. Depending on the case, one effect may outweigh the other slightly.


It is important to note that immunization is based on duration, and relies on the (strong) assumption of the parallel shift in the term structure of interest rates.


In other words, this means that short- and long-term rates should develop in parallel, but this is not always the case in practice. It is, therefore, more effective on long-term strategies, as short-term rates are more volatile.


The complex implementation of this strategy is reserved for professionals and, like all hedging strategies, it generates an additional cost for investors.


f) Inflation Risk

This risk is obviously linked to the risk of interest rate fluctuation that we have just discussed, as an interest rate rise to contain inflation has a negative impact on bond prices.


It is possible to hedge against this risk using inflation-indexed bonds. However, investors must be conscious of the reduced liquidity of this type of bond on the market.


Furthermore, as with money market investments, returns from debt investments may sometimes only just cover inflation in the long term. This risk can be reduced by considering other asset classes.


g) Currency Risk Associated with Bonds

In the case of investments in a foreign currency, i.e., a currency other than the reference currency, exchange rate fluctuations can have a significant impact on the final return.


For a foreign currency investment without foreign exchange risk hedging, the return will be divided into two parts: the gain or loss on the investment itself, and the gain or loss on the exchange rate between the reference currency and the investment currency.


When the currency risk is eliminated, returns will be made up solely of the gain or loss on the investment, minus the cost of the hedge. During some periods, a portfolio hedged against currency risk can outperform one that lets foreign currency fluctuate, but in other periods, the opposite may be true.


As such, is it worth hedging against currency risk, or should exchange rate fluctuations simply be endured?


In general, the answer to this question depends firstly on the weight that the foreign currency position represents in the portfolio. If it is very low (a few percents), it may be justified not to hedge, as the impact on the overall portfolio is negligible. However, if the position is significant (20% or 30%), the question is worth asking.


h) Risks Specific to Emerging Markets

It is difficult for investors to hedge against the various risks involved with emerging markets. Nonetheless, they must be conscious of these risks, and the specific context of a company established there and of the developing country in question must be analyzed in advance.


Political risk

A government's lack of political experience, or the instability of the political system, leads to an increased risk of rapid and intense political and economic upheaval. This risk is obviously greater in emerging countries.


Economic risk

The economy of an emerging market is more reactive to fluctuations in interest rates and inflation than that of a developed country—it is also more exposed to them. A given event can, therefore, have much stronger repercussions.


Furthermore, emerging markets often have a weaker financial base. Finally, their financial markets do not have adequate structure and monitoring systems. As the assessments are different and ratings non-existent, it is much more difficult to assess credit risks.


Credit risk

Investments in government or corporate debt in emerging markets tend to involve higher risks than in developed countries, because of lesser creditworthiness, high public debt, debt conversions, a lack of market transparency or a lack of information.


Currency risk

The currencies of emerging markets undergo stronger and more unpredictable fluctuations than the currencies of developed countries. Some countries have introduced foreign exchange controls, others are likely to do so at any time, or may abandon their indexation to a reference currency.


For example, many export-focused Asian countries use the US dollar for their transactions. These countries have indexed their currencies on the USD to avoid excess exposure to exchange rate movements. However, countries have an increasing tendency to dismantle this system.


Inflation risk

Due to strong price fluctuations and an underdeveloped financial market, the central banks of emerging countries can have difficulty meeting their inflation targets. Inflation may, therefore, fluctuate more than in developed countries.


Market risk

In emerging countries, monitoring of financial markets is faltering if not inexistent, and so regulation, market transparency, liquidity, and efficiency are all lacking. In addition, these markets often display major volatility and significant price differences. Weak regulation accentuates the risk of price manipulation and insider trading.


Liquidity risk

An asset's liquidity depends on supply and demand. However, the social, economic and political developments, as well as the natural disasters that emerging countries experience, can influence the supply and demand mechanism more quickly and enduringly.


Legal risk

The absence or lack of monitoring of financial markets can result in investors being unable to have their legal rights respected, or only with difficulty. An inexperienced justice system can lead to major legal insecurity.


Furthermore, requirements aimed at protecting the rights of shareholders or creditors are often insufficient, if they exist at all.


Execution risk

Clearing and settlement systems often vary from one market to another. Often obsolete, they are a source of processing errors, as well as of considerable delays in delivery and execution. Not to mention that some emerging markets do not have these systems.


Our Advice

In regard to bonds, we recommend:

  1. favoring bonds issued by governments with strong finances;
  2. favoring corporate bonds issued by companies with low debt levels and/or solid fundamentals (industry);
  3. ideally choosing unsubordinated loans;
  4. favoring issues that provide adequate liquidity;
  5. considering the direction of interest rates;
  6. hedging large foreign currency positions according to the degree of conviction.


Our Advice

For investing in stocks, we recommend:

  1. combining individual stocks with index funds or futures; diversifying intelligently;
  2. using effective hedging instruments wherever possible (stop losses, puts, futures); examining liquidity and solvency ratios;
  3. carrying out a strategic analysis of the company and its industry; taking into account the political and regulatory framework;
  4. hedging large foreign currency positions according to the degree of conviction.


Risks Associated with Structured Products

The main risk associated with the issue of structured products is counterparty risk, which depends specifically on the creditworthiness of the issuer. The other risks are related to the components of the structured product and to the movement of the underlying assets.


The bank Wegelin & Cie offers an interesting approach: to decompose the structured product, by separating “the complicated financial instruments and reducing them to a few basic components”.


This approach also has the advantage of separating the so-called “nominal” part from the real part, which constitutes the real exposure to the underlying asset.


For example, by decomposing a capital guaranteed product, we arrive at two components: the bond part (zero-coupon) that provides a capital guarantee at maturity and the options part that makes it possible to profit from a rising market.


Besides counterparty risk, investors are exposed to the risks associated with investing in a zero-coupon bond (essentially default risk) and the risks associated with the movement of the underlying asset, with losses being limited at maturity, however, thanks to the particular construction of this product.


Even so, as part of this capital guaranteed product, if the underlying undergoes a strong decline compared to the initial strike price, the option is likely to become almost worthless, and its delta will fall.


In the event of a market recovery, the extent of the rise will not match the market rebound due to the option's low delta. Moreover, the method used to calculate returns (quarterly, over the last six months, etc.) may also affect the product's final performance.


So using options has its own particularities. The exercise price, the interest rate level and the volatility of the underlying will all affect the price movement of the option and, consequently, that of the product. The reader should refer to the Swiss Derivative Guide 2010, which covers structured products and the use of options in great detail.


Our Advice

For structured products, some of which can be very attractive, we particularly recommend:

favoring quality issuers in order to minimize counterparty risk;

closely examining the product's terms of issue (protection, participation, a method of calculating returns, etc.). They must be attractive enough to justify allocating capital; favoring short-term products. At this stage, it will be useful to spend a moment looking at how options work.


Risks Associated with Commodities and Metals

Tin is mainly used as a protective layer or alloyed with other metals. It is found in containers, receptacles, electronics, and transport.

  1. Lead is a dense, malleable, corrosion-resistant metal used in construction, electrical systems, batteries, and radiation-proof screens.
  2. Commodities and metals are exposed to the following risks.


a) Risk of Price Fluctuation Related to Supply and Demand

As we have already noted, the price of commodities depends on fluctuations in supply and demand over time, which vary according to the economic climate and economic cycles.


The presence of speculators also puts pressure on prices. In our opinion, demand generally has a greater stimulating effect on prices than supply, as to a certain extent supply has to adapt itself to demand.


The price of oil, for instance, is influenced more strongly by demand than supply; however, it is also worth following OPEC (Organisation of the Petroleum Exporting Countries) meetings, which set production quotas—and therefore supply—specifically according to demand.


Member countries may decide, as was the case at their meeting on 10 March 2010, to maintain quotas when supply is sufficient to satisfy demand.


In terms of precious metals and gold, in particular, the influence of central banks must be reiterated, as they buy and sell gold according to their desired level of reserves.


It is difficult for investors to hedge against this risk, but it can be limited by undertaking a comprehensive analysis of the market being considered in order only to invest at opportune (favorable) moments and avoid investing when conditions are difficult.


b) Climate Risk and Natural Disasters

The climate and natural disasters also have an influence on prices. However, weather conditions mainly affect supply. A good (abundant) harvest has the effect of lowering prices, whereas a bad harvest pushes prices up to compensate for the small quantities produced. This risk is less significant for precious metals.


Producers usually protect themselves against this type of event by using insurance or futures contracts. It is difficult for investors to hedge against this risk, but it can be mitigated by a comprehensive analysis of the relevant market, which takes into account prevailing weather conditions that will affect the market.


c) Risk Associated with Government Intervention, Embargoes and Trade Barriers

When conditions of supply or demand become exaggerated, governments reserve the right to intervene in these markets in order to rebalance them by setting quotas or restrictions. The objective is to maintain or return to a fair equilibrium price. This risk exists mainly for commodities.


Once again, it is difficult for investors to hedge against this type of risk, which should really be considered as characteristic of the commodities market (essentially for agricultural products) and constantly borne in mind.


d) Risk Associated with Fluctuations in Interest Rates and Other Variables

The price of commodity futures changes mainly according to interest rate movements, but it also depends on variations in storage costs and in the convenience yield, which is linked to stock levels and their seasonal fluctuations.


Depending on the case, holding the commodities themselves (i.e., immediate availability) does confer advantages that holders of futures contracts do not have.


For example, in the case of heating oil in winter, the spot holder (who buys today for immediate delivery) has an immediate advantage over futures holders, implying, in this case, a high convenience yield that creates a situation of backwardation. This convenience yield is lower in summer.


e) Risk Associated with Exchange Rate Fluctuations

  1. As with any investment in a currency other than the reference currency, investors are exposed to currency risk.
  2. Commodities are often listed in dollars, the movement of which can have various different consequences.


“A rising U.S. dollar normally has a depressing effect on most commodity prices. In other words, a rising dollar is normally considered to be noninflationary.


One of the commodities most affected by the dollar is the gold market, the prices of gold and the U.S. dollar usually trend in opposite directions.” Nonetheless, there are observable instances of gold and the dollar both rising in tandem, perhaps indicating that this relation is waning.


“Commodity prices are considered to be leading indicators of inflationary trends. As a result, commodity prices usually trend in the opposite direction of bond prices.” So the dollar influences commodities, which in turn influence bonds, which finally influence stocks.


f) Risk Associated with Futures Market Cycles

In a situation of normal backwardation, futures prices are lower than the spot price (cash price), and they decrease over time. In this case, the market demands a premium, so to speak, for short-term availability.


Conversely, in a so-called contango situation, futures prices are higher than the spot price, and they are therefore rising over time. In 2009, the structure of the oil futures price curve clearly showed a contango situation (upward sloping).


As we said to begin with, futures contracts are the main instrument for investing in this asset class. Depending on the economic situation and on supply and demand levels, one or other of these two situations may present itself and it is very important for investors to position themselves correctly. Poor positioning is an investment risk.


During backwardation, it is better to buy futures contracts, while during contango, buying at the spot is preferable to buying futures. But this is not always possible in practice, especially for consumable commodities where the use of futures contracts is necessary.


Therefore, with futures contracts, “rollover gains are made when a forward curve is in backwardation, as the expired contract can be replaced by a more advantageous contract. On the other hand, when a commodity market is in contango, rollover losses are inevitable.”


Indeed, in the first case, again is made because a new, cheaper contract can be bought, whereas in the second case, a new contract must be bought at a higher price than the futures contract that has just been sold, thus generating a loss


Our Advice

When investing in energy and precious or industrial metals, we recommend:

  1. studying supply and demand levels according to the economic climate and cycle; taking weather conditions and natural disasters into account; keeping a close eye on state intervention;
  2. taking into account interest rate levels and, more importantly, the situation of backwardation or contango;
  3. monitoring the US dollar;
  4. hedging large foreign currency positions according to the degree of conviction.


Risks Associated with Private Equity

a) Liquidity Risk

A private equity investment usually has very low liquidity due mainly to the existence of lock-up periods, which prevent investors from exiting before a certain date. This risk cannot be avoided. In fact, lack of liquidity is more a characteristic of this type of investment than a risk.


b) Risk Associated with Unlisted Investments

As private equity is not publicly traded, valuation of the investment over time is difficult. Investment in listed private equity funds helps limit exposure to this risk, but as in practice there are very few of these, we tend to consider this risk as one of the characteristics of this investment.


c) Risk Associated with Limited Regulation and a Lack of Transparency

The absence of an organized, regulated market specifically allows this type of investment to be conducted within a less regulated framework, which is also less stringent in terms of transparency.


Investors can reduce this risk by requiring that the manager invest where there are stronger regulations, which depend on the country, and that they provide greater transparency about their investments.


d) Major Insolvency and Bankruptcy Risk

When investing in venture capital, future prospects are uncertain and the ultimate risk of bankruptcy is obviously more pronounced. Investors can lose practically everything.


It is difficult for investors to hedge against this type of risk, even when using financial instruments such as puts or futures. In our view, the best possible hedge for investors who can't manage this risk is simply to avoid this type of investment altogether.


e) Risk Associated with the Lack of Diversification

Private equity typically implies a large concentration of investments in order to allocate considerable initial resources to projects in the development stage, when financing needs are high.


Although it is a characteristic of this type of investment, this approach does, therefore, suffer from a lack of diversification. Diversification into other asset classes, and investing in private equity to a limited extent (a small exposure in the portfolio), will help limit this risk.


f) Leverage Risk

The use of debt is one of the characteristics of private equity and exposes investors to additional financial risk due to leverage, i.e., using debt to increase the investment's profitability.


The borrowed capital must, therefore, generate an additional profit relative to the risk taken. If the risk pays off, gains will be multiplied but, conversely, the same goes for losses. In our view, it is difficult for investors to hedge against this risk.


g) Currency Risk

As with any investment in a currency other than the reference currency, investors are exposed to currency risk. Please refer to the previous discussion on this point.


h) Risk Associated with the Human Factor

Finally, in young companies where the personalities of executives in key positions play an essential role, any change in the team can have extremely negative repercussions on private equity investments.


Private equity is, therefore, a highly speculative investment, and should be considered the riskiest asset class. It may only be suggested to a limited number of investors.


In conclusion, although private equity can be considered an asset class, the activity of venture capital is highly specific and should only be included in a portfolio with the utmost caution.


The frequent lack of listing, the high degree of risk, and the lack of transparency are all issues which must be of paramount concern to investors.


Our Advice

If investors wish to include private equity in their assets, we recommend deciding on the amount to invest, then delegating management to professionals.


Such an investment is somewhat similar to the activity of a business angel or venture capitalist keen to invest actively, i.e., with significant participation in both capital and decision-making. Indirect investment is an alternative, but the choice of fund and manager is paramount.