Abbott Capital’s portfolio risk management model is comprised of three primary components:
- Rigorous pre-investment due diligence
- Appropriate diversification via careful portfolio construction
- Active, ongoing monitoring of portfolio funds and dialogue with GPs
As part of our pre-investment due diligence on every potential investment, key factors are reviewed to assess potential risks, including: fund strategy and relevant domain expertise; competitive and economic environment; backgrounds and track records of the individuals running the fund; loss rates and hit rates of prior funds; and performance of prior funds vs. their peers.
We also seek to manage risk by constructing appropriately diversified portfolios. Thoughtful diversification can mitigate risks over the life of a private equity portfolio, by ensuring that capital is not overly concentrated in any one vintage year, strategy, manager, or region.
We are actively engaged in ongoing monitoring of funds in which we invest. Because of the stability of Abbott’s team, the professionals monitoring an investment late in its life were often the same people involved when we first committed to that fund.