Early recognition and swift correction of any weak spot is key to our long-term success. The final overlay to RiverFront’s Art and Science of Dynamic Investing is risk management ~ the striking of the balance between investor return objectives and risk tolerance. Finding the correct weights for each helps us create a smoother investment journey.

RiverFront practices both proactive and reactive risk management and has tactical plans in place for a myriad of possible scenarios. By managing risk proactively we ensure complex portfolios with multiple asset classes maintain risk levels consistent with portfolio risk tolerance and the overall investment strategy. We engage in reactive risk management by continually examining strategies to ensure the market is validating our theories. If we do not believe the market is affirming the strategy, we change our course.

Proactive & Reactive

Proactive Risk Management

RiverFront portfolios span multiple asset classes with very different risk characteristics (conservative dividend stocks, more aggressive emerging markets equities, high quality bonds, commodities, etc.). To understand the overall risk level of such diverse portfolios, we build and deploy proprietary mathematical models based on historical risk characteristics of the various asset classes within our portfolios. These models quantify both the relative risks of these asset classes and the extent to which those risks tend to expand or offset one another. The proactive risk management process ensures the risk within each of our portfolios aligns with portfolio risk tolerance and the current investment strategy.

Reactive Risk Management

Extensive diligence and care goes into the development of all our investment strategies. However, we are not perfect; and inevitably some of our investment decisions will be better than others. RiverFront’s reactive risk management is designed to compel our portfolio managers to recognize and acknowledge any investment errors or flaws. Our process monitors the performance of our investment strategies and alerts portfolio managers to specific strategies or investments that are not performing as expected. 

Diversification does not ensure a profit or protect against a loss.

Past results are no guarantee of future results and no representation is made that a client will or is likely to achieve positive returns, avoid losses, or experience returns similar to those shown or experienced in the past.

Buying commodities allows for a source of diversification for those sophisticated persons who wish to add this asset class to their portfolios and who are prepared to assume the risks inherent in the commodities market. Any commodity purchase represents a transaction in a non-income-producing asset and is highly speculative. Therefore, commodities should not represent a significant portion of an individual’s portfolio.

Investments in international and emerging markets securities include exposure to risks such as currency fluctuations, foreign taxes and regulations, and the potential for illiquid markets and political instability.

Stocks represent partial ownership of a corporation. If the corporation does well, its value increases, and investors share in the appreciation. However, if it goes bankrupt, or performs poorly, investors can lose their entire initial investment (i.e., the stock price can go to zero).  Bonds represent a loan made by an investor to a corporation or government.  As such, the investor gets a guaranteed interest rate for a specific period of time and expects to get their original investment back at the end of that time period, along with the interest earned. Investment risk is repayment of the principal (amount invested). In the event of a bankruptcy or other corporate disruption, bonds are senior to stocks.  Investors should be aware of these differences prior to investing.

In a rising interest rate environment, the value of fixed-income securities generally declines.

Risk management processes discussed are for our Advantage portfolios. The risk management processes for our other portfolios and products will differ from the processes discussed in this video.

RiverFront is owned primarily by its employees through RiverFront Investment Holding Group, LLC, the holding company for RiverFront. Baird Financial Corporation (BFC) is also a minority owner of RiverFront Investment Holding Group, LLC and therefore an indirect owner of RiverFront. BFC is the parent company of Robert W. Baird & Co. Incorporated (“Baird”), a registered broker/dealer and investment adviser.

Click the links to the right for: a link to Asset Class Definitions and Composite Benchmark Definitions and Important Risk Considerations.


  • RiverFront’s Price Matters® discipline compares inflation-adjusted current prices relative to their long-term trend to help identify extremes in valuation. 
  • Mean reversion is the tendency of a variable, such as a stock price, to converge on an average value over time.