From the course: Introduction to Risk Management

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Investment risk

Investment risk

From the course: Introduction to Risk Management

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Investment risk

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- Within the financial services industry, there are several players who take funds from their clients and invest those funds on their behalf. Examples include investment or asset managers, hedge funds, pension funds, and insurance companies. Let's group all of these different players under the one heading, investment managers, just for simplicity. These investments are subject to investment risk. Investment risk is the manifestation of market risk within an investor's investment portfolio. In other words, investment risk is the risk that an investor's portfolio might fall in value resulting in an investor losing part, or maybe even all of their investment. What's critical to understand here is that it's not the investment manager that's exposed to investment risk. If the fund that they are managing falls in value, it is the client, their investor, who bears this investment risk. There are different ways to classify investment managers. A common approach is to classify them as either…

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