Backward-looking? Dispelling myths about risk-based solutions

The benefits of risk-based solutions have been well documented. However, the difference between risk-profiled (or risk-rated) funds and risk-targeted funds is not always clearly understood. Descriptions vary, although risk-targeted funds are usually portrayed as being designed to meet defined volatility targets, where the goal is to manage them within a set volatility band or ‘risk budget'. Risk-profiled options, on the other hand, are sometimes dismissed as funds which have merely been allocated a risk rating based on the past volatility of the portfolio or asset mix. These are very ...