The following research paper was selected for presentation in the Due Diligence Forum program at PortfolioConstruction Conference 2008.

Category
Subcategory

Of Interest  (Fixed Interest / Credit)
Australian Credit

Due Diligence Forum speaker

Sarah Percy-Dove
Head of Credit Research
Colonial First State Global Asset Management
brought to you by Colonial First State Investments

Due Diligence Forum summary

"There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know." – Donald Rumsfeld, US Secretary of Defence, February 2002.

Investment managers know some risks are expected to occur and, in credit, there is a high probability that a portfolio will experience a default. However, there are risks no-one anticipates. As investors, we can manage and limit expected losses, but it takes expertise to limit the impact of an extreme event. In credit portfolios, this extreme event is called tail risk. This session and underlying research paper examine the risks within credit portfolios and how to manage them.