We are pleased to share a recent article written by our CEO Andrea Luzzi on “Risk – An Alternative Approach” which was published in the October issue of PRMIA (Professional Risk Managers’ International Association) magazine.
When you manage a portfolio of hedge funds you realize that the traditional framework of modern portfolio theory is neither modern, as it likes to be called, nor satisfactory. As fund managers, we had to make a decision: should we stay with the orthodox doctrine, or should we go? We found our own heresy developing a new risk measure: The Downside Capture Ratio. Like Columbus’ egg, the idea is pretty straightforward. We abandoned descriptive statistical measures and we concentrated on the only information that we want to extract from data: “How much money do I lose if…?
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