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Risk management

Careful monitoring of risks lies at the heart of the investment process. It is inseparable from the search for performance. We pay close attention to identifying, quantifying and analysing the risks related to our management approach. The Risk Management team monitors portfolios’ risk profiles.

An independent management team


 
The team reports directly to the Managing Director, Eric Helderlé. It is independent from the fund management team.

There are four people in the risk management team, led by Patrick Temfack. Patrick Temfack has more than seven years of experience in this field and is a member of the French Asset Management Association’s Risk Management Committee.  
 

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What are the main risks?


  • Market risk

    Risk of loss due to fluctuations in the portfolio’s market value

    - Equity risk (equity exposure),
    - Currency risk (currency exposure),
    - Interest rate risk (modified duration),
    - Credit risk (issuer spreads),
    - VaR, CVaR, Stress tests.

  • Counterparty risk

    Risk of a counterparty defaulting and failing to repay its debt

    Analysis of CDS spreads and securities’ volatility.

  • Limits and restrictions

    Risk of each portfolio failing to respect its constraints

    - Regulatory (AMF, CSSF),
    - Prospectus,
    - Internal rules.

  • Liquidity risk

    Risk of being temporarily unable to sell a security in the portfolio

    - Least liquid investments,
    - Time to close a position,
    - Liquidity profile in normal and distressed markets.

Three levels of constraint


 
The risk management team monitors compliance with the various constraints on each portfolio.

They provide fund managers with a detailed report on their portfolios’ risk profile on a regular basis, notably every morning and before the markets close in France every evening.

  • Regulatory constraints imposed by the regulator :
    These apply to all asset management companies.
     
  • Statutory constraints imposed by Carmignac :
    Set out in the prospectus, these are the pledges made to investors.
     
  • In-house limits determined by Carmignac’s Risk Committee :
    At meetings, these limits are reviewed and if necessary adjusted according to macroeconomic conditions.
     

Real-time risk management


 
The risk management team has unrestricted access to the same resources as the fund management team. They therefore track fund managers’ positions in real time. This monitoring allows them to be reactive and immediately identify potential breaches and failure to respect constraints.

Risk management and monitoring are applied independently and uniformly to all fund managers and all portfolios.  

Level one

  • The risk management team ensures compliance with constraints on an ongoing basis and at least twice a day.
  • The fund manager is immediately informed of any breaches.
  • As soon as this alert is sent, an escalation procedure (going as far as Edouard Carmignac in the event of persistent breaches) is triggered.
     

Level two

  • The internal control and compliance department oversees the proper application of the level one control system.

 

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Real-time risk management


 
The risk management team assists the fund management team in overseeing the investment strategy.

  • Financial analysis

    The financial analyst gives the fund management team a favourable or unfavourable opinion on a security.

  • Stock-picking

    A fund manager wishing to invest in a position may request the opinion of the risk management team to check the impact of this choice on the portfolio’s risk profile.

  • Risk monitoring

    The risk management team analyses changes in the portfolio’s overall risk profile – if the security is included in the portfolio – and provides the fund manager with a report.

  • Investment decision

    The fund manager reaches a decision after listening to the risk management team’s recommendations.

  • Risk management

    Every morning and evening, the risk management team checks whether the Fund’s risk profile respects regulatory and legal constraints as well as in-house limits.

Risk Committee


 
The Risk Committee’s role is to analyse risks attached to the investment process for each portfolio.

Each month, it reviews the main risks indicators and holdings requiring special attention.

The Committee studies each new product and the risks that it presents.

Members of the fund management team and investment committee receive a list of recommendations after this meeting.  
 
With 12 permanent members The Risk Committee is led by Eric Helderlé, Managing Director, Head of the Risk Committee, and sits in the presence of:

  • Christophe Peronin, Deputy General Manager
  • Maxime Carmignac, Managing Director Carmignac Gestion Luxembourg, UK Branch
  • Patrick Temfack, Risk Manager
  • Mécapeu Gbandah, Risk Analyst
  • Jean-Yves Lassaut, Risk Controller
  • Jean-Philippe Boudret, Risk Controller
  • Nicolas Pierre, Risk Controller
  • Ahmed Harichi, Risk Controller
  • Christophe Maheu, Internal Auditor
  • Tatiana Khorina, Head of Compliance
  • Julien Chéron, Quantitative Analyst, Fund Manager

A fund manager or member of the operations team may also attend this Committee from time to time for relevant issues.