Risk Management Playbook For Alternative Investment Funds

The Alternative Investment Funds (AIF) industry has witnessed tremendous growth in the last decade on the back of quality active fund managers and investors seeking diversification beyond traditional investment options. However, the chase for returns may push one into a labyrinth of risks. As Warren Buffett famously said, "risk comes from not knowing what you're doing." For fund managers, the challenge is not just knowing what they are doing. For them, it is imperative to know what everyone else (such as regulators, investors, promoters, politicians and world at large) might do next as that could have a direct or indirect bearing on the fund's investment and exit strategy.

In essence, risk is the probability of occurrence or non-occurrence of a parameter/circumstance that could, or potentially could, adversely affect the objectives of the fund. Risk monitoring, mitigation and redressal is a dynamic process - requiring real-time proactive monitoring of