By Claire Makin
Stenham Asset Management owes a great deal of its success to keeping out of trouble, says Kevin Arenson, chief investment officer of the $3 billion fund of hedge funds operation. His mantra is that avoiding risk is just as important as achieving returns.
For Arenson, risk does not mean degrees of volatility. Risk means the potential to lose money, and Stenham relies on a wide array of tools to identify it, from quants crunching numbers to a simple hunch that something is just not right with a manager or a market.
"There is no magic to this. We are following a Warren Buffett approach: avoid things you don't understand, avoid fancy derivatives, and make sure you understand the risks," Arenson says.
Stenham specialises in consistent returns with low volatility, an achievement for which its funds have won many awards, including the 2009 InvestHedge Long Term...