The financial markets have tested U.S. institutional investors mightily over the past five decades. Investors have had to manage risk, returns, and liquidity during many volatile times, including the oil crisis in the 1970s, the “tech wreck” of the early 2000s, the 9/11 terrorist attacks, and the global financial crisis. Through it all, many institutional investors have risen to the challenge and planned for the turbulent times we find ourselves in today. While the past helps us prepare, we also need to ascertain which new approaches are appropriate.
As institutional investors in North America look out over the next several years, they must reassess their portfolios and governance structures. These reassessments help investors evaluate whether they are prepared for an evolving environment where an organization can face enterprise-level threats and rapidly changing markets simultaneously.
This paper provides a framework for institutional investors to respond to volatility consistently and thoughtfully in ways that should help improve returns and oversight while reducing risks and costs.