Risk management is central to our investment process. Ensuring all risks are understood, monitored and mitigated where possible, is essential to the growth of our fund.
KWSCM has a three-layer approach to our risk management which aims to ensure all eventualities are captured and managed:
• Internal systems and controls
• Adherence to all risk and compliance requirements of G10 Capital Ltd (Investment Manager)
(KWSCM is the Appointed Representative of G10 Capital Ltd for the KWSCM fund)
• Adherence to all compliance requirements of IQEQ Financial Services B.V. (the fund administrator), who provide KYC, AML, accounting and valuation services.
Internal systems and controls
All potential strategies must be rigorously tested prior to inclusion in the fund, covering classic and proprietary metrics.
The minimum timescale for a new strategy to be tested is six months. All live testing takes place outside of the fund by our research analyst, under the supervision of Chris Pordum, CIO.
Once thoroughly tested to ensure performance standards are met, portfolio managers also ensure it will
complement the strategy portfolio on offer, with the aim to maximise capital return for investors without
Daily, weekly and monthly analysis on performance of currency pairs and strategies as well as current market conditions takes place to ensure funds are allocated appropriately across all strategies. In addition, weekly strategy meetings ensure that there are a variety of trading strategies in play using different instruments to limit concentration risk.
In addition to stringent risk management of our strategies and fund allocation, business risks and operational risks are also continuously monitored to ensure processes and controls are adhered to and updated as required.
These include, but are not limited to:
1. Internal controls and segregation of duties, including human-factor risk
2. Volatility risk
3. Systems and backup
4. Regulatory risk
5. Liquidity risk/margin risk
6. Third-party and counterparty risk
Some examples of our internal risk-management processes
Liquidity risk and volatility risk
• Majority of volume traded is in the G10 currencies, as these are the most liquid
• Maintaining more than 1 liquidity provider and method of execution
• Avoiding known event driven market conditions, like high impact news announcements
• Stop losses placed on every trade
• Maximum 6:1 leverage for ordinary shares
System failure & counterparty risk
• Ensuring our systems are all backed up daily
• Fail over processes in place for disaster recovery at both KWSCM and external technology suppliers and liquidity providers
• Security and protection for our intellectual property and client data protection
Individual portfolio manager risk
• Systems in place to ensure adherence to trade plans, trading within legal and ethical constraints
• Systematic controls to manage trade size and risk allocation
• Daily, weekly and monthly trade analysis performed by back office to review effectiveness
• Exposures monitored in real time by trader and middle office
• Daily evaluation against current and expected market conditions and their impact