RISK MANAGEMENT
TAKES ART AND SCIENCE.

OVERVIEW

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. 

 

These materials include general information and have not been tailored for any specific recipient or recipients.  Accordingly, these materials are not intended to cause RiverFront Investment Group, LLC or an affiliate to become a fiduciary within the meaning of Section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974, as amended or Section 4975(e)(3)(B) of the Internal Revenue Code of 1986, as amended.

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.

Definitions:

  • 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.