PCG AM USES A MULTI-TIERED SYSTEM TO MANAGE RISK, ENSURING APPROPRIATE DIVERSIFICATION AT THE PORTFOLIO LEVEL, WHILE FOCUSING ON FUND LEVEL ISSUES BOTH PRE- AND POST-INVESTMENT.
From our perspective as an advisor and manager, a key aspect of risk management involves appropriate portfolio diversification. PCG AM regularly evaluates our clients’ portfolios for areas of excessive risk, including geographical, industry or sector over- or under-exposure through strategic and tactical planning. We then recommend changes in prospective manager selection in order to dynamically rebalance each portfolio. PCG AM strongly believes that it is difficult to make accurate predictions about the macro economy and the expected performance of different private equity asset classes several years in the future; therefore, we advocate a disciplined investment approach for our clients, with appropriate allocations to all of the major private equity classes on a strategic basis. Within that framework, we help clients identify and implement tactical shifts in their programs in order to capitalize on medium- and short-term market opportunities to boost returns and mitigate risk.
We develop customized solutions for each client based on their distinct investment goals, objectives and risk tolerance levels. In order to structure optimized portfolios for each client, any recommended investment must be appropriate and additive to the client’s portfolio and achieve a high level of investment merit.
Pre-Investment Risk Review
We believe that comprehensive risk management begins with a thorough due diligence process aimed at fully understanding the potential rewards and risks of each investment opportunity; a process that allows us to select top-tier managers for our clients. Post-investment, we maintain a continuous monitoring process to ensure adherence to investment strategy, diversification, and performance goals.
Protecting Investors’ Interests
PCG AM is integrally involved in the structuring of limited partnership agreements relating to our clients’ fund commitments in order to ensure the best possible alignment of interests with general partners, as well as strong limited partner protections. PCG AM can act as both an advisor to client counsel and as a direct negotiator of partnership agreements, depending on client preference. Some of these considerations include appropriate fees, clawback provisions, key person provisions, portfolio diversification, and concentration limits.
Post-Investment Risk Monitoring
Our Portfolio Monitoring & Reporting department scrutinizes fund activities through the evaluation of cash flows and investment reports, in addition to regular communications with investor principals. Furthermore, we make certain that the necessary financial controls are in place to protect the interests of our clients. We track our clients’ portfolio concentrations by industry, geography, company and manager to better understand portfolio risk.