Risk Process

Proprietary, Integrated Approach

At Key, we place a high degree of emphasis on risk management. Our proprietary risk models have been developed specifically for use within a hedge fund of funds environment and are fully integrated into Key’s investment and due diligence functions, allowing risk management to permeate through the entire investment process.

Active, Forward-Looking Risk Management

Central to Key’s risk philosophy is an understanding that risk management should be both active and forward-looking. We are acutely aware that a reliance on historic returns, an assumption of normal distributions and static correlations can all lead to significant underestimation of hedge fund risk, especially in the downside tail.

We believe that a more robust understanding of risk can be obtained through a rigorous analysis of risk factor exposures in underlying funds across a wide range of market conditions. Such an approach reinforces our focus on controlling tail risk and minimising unwanted exposures in Key’s funds.

Pragmatic and Transparent

Finally, and most importantly, we feel that quantitative analysis alone, no matter how sophisticated, can only ever paint half a picture. By employing the best quantitative methods, coupled with a solid operational risk framework, within a broader qualitative understanding, we are able to obtain a more realistic description of portfolio risk.

Key prides itself on transparency and accountability of process; therefore we have chosen to publish our risk management methodology through the University of Cambridge (available on request), and as a peer reviewed paper in the European Journal of Finance.