The actual investment strategy of a fund at a particular point in time is the investment strategy being implemented by the fund.
Business activities include the indirect support of the investment activities of the fund, including all of the normal activities of running any similarly sized organization, such as human resources management, technology, infrastructure, and facility maintenance.
Business risk is the added economic dispersion caused by unexpected performance of the business team and business activities.
Custody refers to the safekeeping of the cash and securities of a fund.
A fund culture is a generally shared set of priorities and values within the fund's organization.
Gaming refers to strategic behavoir to gain benefits from circumventing the intention of the rules of a particular system.
Investment activities span the investment process, involving all aspects of determining and implementing investment decisions.
investment management governance process
The investment process in discretionary cases centers on the investment management governance process, which is the explicit or implicit set of procedures through which investment decisions are made.
An investment mandate is an explicit or implicit statement of the allowable and intended strategy, goal, and/or risks of an investment program.
The investment process includes the methods a manager uses to formulate, execute, and monitor investment decisions, and spans the range of investment activities, from the design of the investment strategy, through the implementation of the ideas into decisions, and ultimately to the placing and execution of trading orders.
investment process risk
Investment process risk is economic dispersion caused by imperfect application of the stated investment strategy by the investment team.
A fund's investment strategy refers to the set of objectives, principles, techniques, and procedures used to construct and modify the fund's portfolio.
market risk in the investment process
In discussions of investment process, the market risk in the investment process describes any systematic or idiosyncratic dispersion in economic outcomes attributable to changes in market prices and rates.
Operational activities include the direct support of investment activities, often described as middle office and back office operations.
Operational errors are inadvertent mistakes made in the process of executing a fund's investment strategy.
Operational fraud from the perspective of an investors is any intentional, self-serving, deception behavior in the operational activities of a fund that is generally harmful to the investor.
A broad interpretation of operational risk is that it is any economic dispersion caused by investment, operational, or business activities.
permitted investment strategies
The permitted investment strategies of a fund delineate the range of investment strategies that the fund's managers have communicated and are mandated as allowable for the fund to implement.
A position limit is a specific restriction on the size of the holdings of a particular security or combination of securities.
Risk limits are the maximum levels of measured risk that are allowed in a portfolio, in terms of both individual risks and aggregated risks.
A rogue trader intentionally establishes substantial positions well outside the investment mandate.
A slack variable is the variable in an optimization problem that takes on whatever value is necessary to allow an optimum to be feasible but, while doing so, does not directly alter the value of the objective function.
stated investment strategy
The stated investment strategy of a fund is the investment strategy that a diligent investor would expect the fund to pursue, based on a reasonable analysis of information made available by the fund.
Style drift (or strategy drift) is the change through time of a fund's investment strategy based on purposeful decisions by the fund manager in an attempt to improve risk-adjusted performance in light of changing market conditions.
synergistic risk effect
A synergistic risk effect is the potential for the combination of two or more risks to have a greater total risk than the sum of the individual risks.