Decoding Active Management

Risk and reward

Investing money in the stock market will always involve an aspect of risk. As a fund manager it is our job to manage risk in order to help you achieve your financial objectives and help your money grow. Managing risk is probably one of the most important aspects of a fund manager’s job.
There are some specific risks that active managers are concerned with:

Market risk

The risk of investments declining in value because of economic developments or other events that effect the entire market.

Equity risk

This applies to investment in shares. The market price of shares varies all the time depending on supply and demand. Equity risk is the risk of loss because of a drop in the market price of shares.

Interest rate risk

Changes in interest rates are likely to affect the Fund’s value. In general, as interest rates rise, the price of a fixed rate bond will fall, and vice versa.

Currency risk

Where investments are in assets that are denominated in multiple currencies, or currencies other than your own, changes in exchange rates may affect the value of the investments.

Liquidity risk

Some funds hold assets which could prove difficult to sell. The fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.

Credit risk

This relates to debt investments such as bonds. It’s the risk that the government entity or company that issued the bond will run into financial difficulties and won’t be able to pay the interest or repay the money invested back at maturity.

You may also like

About Us

Millions of people around the world rely on Columbia Threadneedle Investments to manage their money. We look after investments for individual investors, financial advisers and wealth managers, as well as insurance firms, pension funds and other institutions.

Our Funds

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.