Performance Risk Management Framework for Investment Portfolios

This technical report introduces the concept of Performance Risk Management, which aims to enhance portfolio risk management beyond traditional volatility and market risk measures. It emphasizes the importance of capturing the risk of absolute or negative portfolio performance, which can significantly impact capital and client relationships. The report outlines the Trend Capture Model developed by Trendrating, which identifies price trends early to help investors maximize participation in uptrends while minimizing exposure to downtrends. The document includes a detailed analysis of drawdown reduction during bear market phases, showcasing the effectiveness of the Trendrating model compared to traditional buy-and-hold strategies. It presents statistical data on drawdown reductions across different investment universes, demonstrating the model's capability to limit losses and improve portfolio performance. The report concludes by asserting that Performance Risk Management should be integral to the risk management strategies employed by investment managers to ensure comprehensive risk control.