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Managing Risk: The Active Approach


  • Risk management is a tool to access market opportunities, not simply to minimize risk.
  • A risk management team that is autonomous can adeptly manage both portfolio and firm-wide risks.
  • A risk framework can complement the discipline embedded in each portfolio manager’s investment process.

Any asset manager worth its salt will vow to prudently monitor and minimize risk. Cutting through the noise of how that all happens is not simple, and neither is figuring out how an investment shop really thinks about and uses risk. Fact is, the realities of the modern marketplace make risk not something to shun, but rather something to use wisely in order to access upside potential.

Risk is not a burden to bear. It’s a byproduct of active investing and it’s also a tool to tap opportunities that a passive strategy doesn’t seek to access. Risk is about the cost of taking action, and it’s also about the implications of not taking action. All in all, we know from years of experience that taking risk is not the same as using it actively toward a set of objectives.

To be sure, managing risk requires a diligent and able team of professionals who can develop and monitor its constructive role at both the firm and portfolio level. We think an independent risk function makes the most sense. We also think that taking and managing risk can create value for investors.

Our risk management functions are germane to our investment process and enterprise operations. We manage risk and use it as a powerful tool by employing

  • An autonomous risk management organization The Chief Risk Officer is independent of the Chief Investment Officer and reports directly to the Chief Executive Officer.
  • A solid partnership between Portfolio Management and Risk Management The risk framework and quantitative analysis is a complement to risk management discipline at the portfolio level.
  • A focus on enterprise risk management Both investment risk and enterprise risk fall under the purview of the Chief Risk Officer, who provides a fuller view of risks the firm may face.

Risk management is not only a responsibility of the firm, but it is also a critical component of our success.

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These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the open of business on September 16, 2013, and are subject to change based on subsequent developments.

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

Before investing in any of the Oppenheimer funds, investors should carefully consider a fund's investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling 1.800.CALL OPP (225.5677). Read prospectuses and summary prospectuses carefully before investing.

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