Grabbing the Bull by the Tail: Assessing Tail Risks Amid Complexity
As a case study into our assessment of tail risks, we discuss how the market-implied probability distribution for a recession has evolved over the past year.
PGIM’s risk management approach, across asset classes and investment styles, grounded on Prudential Financial Inc.’s history of managing risk for over 145 years, enables our affiliate managers to apply deep expertise, identify emerging risks, and deploy investment strategies for the benefit of our clients. This approach reflects our belief and experience that as the investing backdrop changes, the drivers of risk will likely evolve as well.
Across market cycles, PGIM seeks to appropriately balance risk and reward through a combination of systematic top-down and bottom-up monitoring and assessment of market, credit, liquidity and operational risks. Through our multi-manager model and global footprint, PGIM provides institutions access to a range of investment strategies that are designed to mitigate fallout in times of market stress, generate returns during periods of volatility, and provide diversification through public and private alternatives and dynamic multi-asset solutions.
At PGIM, risk management is at the center of our corporate governance, investment process, and organizational culture.
With a rapid evolution in global trade and economic policy comes a heightened sense of uncertainty over the outlook. The challenge facing institutional investors is twofold: rethinking forecasts for a new economic era, and managing risk—and unintended consequences—as trade policy takes a different course.
With more than 1,400 investment professionals located on the ground across 47 offices, PGIM is focused on managing risk, harvesting its opportunities, and mitigating its potential adverse effects wherever these may arise.
Implement governance and investment processes that seek to identify risks that may potentially impact investment performance of public and private assets
Aim to manage risks with custom stress testing, disciplined due diligence, and asset-class diversification
Update and monitor qualitative and quantitative rankings, and proprietary risk attribution models
Conduct periodic and ad-hoc in-depth risk reviews with investment committees
Dedicated team that provides objective, data-informed analysis to help CIOs and Investment Committees manage their portfolios. IAS provides custom client research that focuses on asset allocation, portfolio construction, real assets and manager allocation & selection.
PGIM Real Estate offers a range of real estate equity, real estate debt, impact and agriculture investment strategies across the risk-return spectrum.
We put our fiduciary responsibilities first and are committed to transparency and maintaining a robust risk management environment. PGIM Real Estate takes a consistent approach to risk management that is applied globally to assess multiple levels of risk management at the enterprise, operational and investment levels.
Our robust risk management practices are coordinated through our well-staffed Legal, Investment Risk, Operational Risk, Internal Audit, and Compliance teams to provide governance, organizational infrastructure and processes to:
Additionally, our internal, dedicated Investment Research team is focused on actionable and relevant guidance to portfolio, transactions, and asset management teams. At the highest level, Investment Research consistently informs PGIM Real Estate’s professionals on opportunities and risks.
PGIM Real Estate has been a signatory of the UN Principles for Responsible Investment since 2009 with consistently high scores for governance, and seeks to embed ESG best practices throughout our risk management processes.
PGIM Quantitative Solutions, Quant Equity: believes that company fundamentals ultimately drive long-term security prices, and we seek opportunities to benefit from the deviation between current pricing and a company’s long-term intrinsic worth. We utilize advanced quantitative techniques along with a blend of traditional and non-traditional insights derived from continuous research that enables our investment process to adapt and evolve over time.
PGIM Quantitative Solutions, Multi Asset: PGIM Quantitative Solutions’ Multi-Asset team produces proprietary Capital Market Assumptions (CMAs) which underpin our outlook on asset classes and the macroeconomic climate. CMAs form the basis of our strategic allocations, the foundation on which the Multi-Asset team seeks to construct its most appropriate investment solutions for each client.
Our systematic multi-asset strategies rely on factor models for asset selection and propriety optimization methods for portfolio construction. We use selective factor exposures, based in economic theory and insights from behavioral finance, to target risk-adjusted performance.
PGIM Wadhwani is a London-based quantitative multi-asset macro specialist, backed by one of the world’s largest asset managers. PGIM Wadhwani investment professionals include experts in economics, econometrics and portfolio construction.
Jennison Associates specializes in active equity and fixed income investing, applying a fundamental approach to research and security selection. Risk management is integral to how we conduct our business and we believe that as the investment and operating environment evolves, so will the drivers of risk. Our risk framework is designed to identify and mitigate the various forms of risk, with controls including systems and process monitoring and periodic risk reviews at the senior-most levels of our organization.
PGIM Private Capital’s global network penetrates target markets and offers steady deal flows to investors, while building direct relationships with prospective issuers. We have 185 dedicated investment professionals on 47 deal teams and operating in 15 offices globally.
Our Patient, Long-Term investment Strategy is backed by a comprehensive Investment Process.
Credit Analysis / Pricing: