Private market investments - risk assessment

Benefits of risk assessment applied to investments

by Edward Robertson

Exempt Market Dealers and investment firms carry out due diligence. Each firm seems to have its own method; it is scarcely evident to the investor that there is a universal standard guiding due diligence. Beyond that, it is even less evident that risk assessment -- that is, the investigation of uncertainty -- is actually done. I propose that many prior signs of project failure or under-delivery are detectable and manageable in advance.

Avoiding the effects of volatility

Avoiding volatility - private market investments

by Edward Robertson and Peter Falohun
[revised 18 November 2016]

In Modern Portfolio Theory, volatility, measured as standard deviation, has become "the most used gauge for investment risk". [1] 

Volatility is a measure of the variability of a security's price, or of its returns. The basic meaning is fluctuation or deviation from the mean; it is used as a proxy for risk, giving a kind of shorthand to characterize a security.

Let us focus on volatility in the sense of downturns in the price or reduced distributions of an asset, in the short to medium term (even if the asset later recovers). We identify underlying causes and downstream effects, stated as risks, and consider mitigation using private assets investments.

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