Risk Control

Risk control is at the heart of the investment process, and is inseparable from the search for performance.
We pay particular attention to identifying, quantifying and analysing the risks inherent in our management.
On a day-to-day basis, the Risk Control department is responsible for ensuring that the risk profile of our portfolios is consistent.

A team independent of the investment team

Totally independent of the investment team, the Risk Control department reports directly to Christophe Péronin, Deputy Managing Director of Carmignac Gestion, who also chairs the Risk Committee, the main decision-making body on risk policy.

The team currently comprises five people under the responsibility of Patrick Temfack, who has over 20 years' experience in risk control in asset management.

A dual approach to risk control

In carrying out its duties, the Risk Control department relies on two complementary analytical approaches whenever possible:

  • a qualitative approach based on common sense and expert advice drawing on the experience acquired by our teams
  • a quantitative approach based on the use of mathematical models for assessment and forecasting purposes.

To implement them effectively, Risk Control mainly uses reference tools/software:

  • Bloomberg Compliance Manager for investment restrictions monitoring
  • MSCI Risk Managers (Riskmetrics) for calculating overall risk and assessing market risk
  • MSCI LiquidityMetrics for liquidity risk assessment and management.

Nature of breaches

  • Liquidity risk Minimum size
  • Holding ratio
  • Free float percentage
  • Time required to sell assets
  • Number and weighting of the least liquid positions
  • Portfolio liquidity profile in normal and distressed markets

three levels of constraint

Throughout the day, the Risk Control department monitors compliance with the various investment constraints defined for each fund and provides detailed reports to the investment team.

There are generally three levels of constraints:

Regulatory constraints:

  • Imposed by the regulator where the fund is domiciled (AMF in France, CSSF in Luxembourg, CBI in Ireland and FCA in the UK), they apply to all players in the asset management industry.

Statutory constraints:

  • These are linked to the description of the investment strategy and therefore to the investment rules set out in the fund's prospectus and/or any other related documentation.

Internal constraints:

  • Established by Carmignac's Risk Committee, these more restrictive internal rules aim to reduce the risks identified as significant based on the macro-economic environment, even if they are authorised from a regulatory and statutory point of view.
    These rules may be reviewed and adjusted if necessary at the discretion of the Risk Committee.

Monitor risks in real time

The Risk Control department has real-time access to the composition of the investment team's portfolios. This enables it to be more reactive and even proactive in immediately identifying risks of non-compliance with the management mandate.
An escalation procedure can be used to immediately notify portfolio managers of situations of non-compliance, and to quickly inform Executive Management in the event of persistence or recurrence.

In addition to the investment team, which has primary responsibility for risk management, there are three levels of risk control:

Level one

  • The Risk Control department monitors compliance with these constraints on a daily basis and reviews the oversight system (application settings, procedures) on a regular basis.

Level two

  • Internal Control and Compliance ensure that the Level 1 control system is properly applied.

Level three

  • The Risk Control and Compliance departments also use external investment rule monitoring services to independently assess the effectiveness of the monitoring system.

Risk management, an integral part of the investment process

The Risk Control department monitors the work of the investment team to ensure compliance with its investment strategy.

Investment selection

Portfolio managers wishing to invest in certain securities may seek the advice of the Risk Control department to verify the impact of this choice on the risk profile of their portfolio.

Risk management

Using its monitoring tools, the Risk Control department continually reassesses the portfolio's risk profile to ensure that it is in line with the target risk profile described in the prospectus.

Investment decision

The portfolio manager's investment decision is based on the recommendations of the Risk Control department.

Risk control

The Risk Control department checks daily that the portfolio complies with all regulatory, statutory and internal constraints.

Risk Committee

The role of the Risk Committee is to analyse the risks associated with the investment process for each portfolio. Every month, the main risk indicators and positions requiring particular attention are reviewed.

The Risk Committee also examines any request to create a new product and has the power to oppose it. Following this meeting, it issues recommendations to the management teams and members of the Investment Committee.

Comprising 7 permanent members, the Risk Committee is chaired by Christophe Péronin, Managing Director of Carmignac Gestion, and is attended by:

  • Maxime Carmignac, Chief Executive Officer and Director of Carmignac UK Ltd
  • Patrick Temfack, Head of Risk Management
  • Cyril de Girardier, Chief Financial Officer Group, Conducting Officer Carmignac Gestion Luxembourg
  • Jacqueline Mondoni, internal auditor
  • Abdellah Bouziane, Global Head of Compliance
  • Guillaume Huteau, Front Office Risk Manager

The departmental teams (Risk Control, Compliance, Front Office and Risk Management) also take part in the Risk Committee. In particular, they present their analysis work. One or more members of the management team may also be invited to attend when the subject requires their presence.

Legal information

This is an advertising document. This article may not be reproduced, in whole or in part, without prior authorisation from the management company. It does not constitute a subscription offer, nor does it constitute investment advice. The information contained in this article may be partial information and may be modified without prior notice. In the United Kingdom, this page was prepared by Carmignac Gestion, Carmignac Gestion Luxembourg or Carmignac UK Ltd and is being distributed in the UK by Carmignac Gestion Luxembourg.