Global Balanced Risk Control Strategy: Total Portfolio Risk Control
Global Balanced Risk Control Strategy: Total Portfolio Risk Control

Global Balanced Risk Control Strategy: Total Portfolio Risk Control


The Morgan Stanley Global Balanced Risk Control (GBaR) Strategy follows a top-down global asset allocation approach, investing in equities, fixed income, commodity-linked investments and cash, within a clearly-defined, risk-controlled framework. It aims to provide capital growth over time, while actively managing total portfolio risk, which we define in terms of volatility or value-at-risk (VaR).

We manage GBaR portfolios to a range of risk targets; the goal is to always maximise returns for the level of risk taken. To help achieve this, the strategy seeks not only to participate in rising markets, but also to mitigate downside risk in more volatile markets.

Investment Approach

The Global Balanced Risk Control team believes that:

Risk exposures must be intentional
Investing in a diversified set of global asset classes, taking only systematic risks that we expect to be rewarded, is the best way to deliver the optimal return for the risk taken

Anticipating volatility is crucial
Only by anticipating volatility can we manage a portfolio’s broad asset mix to meet our volatility target

Tactical asset allocation can add value
Allocation within asset classes – e.g., between equity regions or high-quality and lower-quality securities – can add value

Flexibility improves outcomes
A flexible approach – in terms of asset weights and implementation – is the optimal way to meet our objectives

Time-tested process, run by an experienced team
We have a long history of managing portfolios, consistently following the same asset allocation process that we have successfully applied to client portfolios since 2009.
Volatility-targeting process aims to provide a stable risk profile
We never lose sight of returns, but we start with a volatility target consistent with the client’s risk appetite, which becomes our primary reference point. The strategy’s flexible asset allocation process enables the portfolio managers to dynamically adjust positioning, to maintain a stable risk profile, in line with the set guidelines.
An academically-rigorous approach, applied in a real world setting

The process is grounded in modern portfolio theory and combines a fundamental flexible investment approach, with the advantages of quantitative implementation tools.

Dynamic positioning to capture current opportunities

Portfolios within the GBaR strategy are generally rebalanced as market conditions warrant, but at least on a monthly basis, at which time; the broad asset mix consistent with a portfolio’s target volatility or dynamic “proxy” portfolio is redefined.

Investment Process

Since 2009, the Global Balanced Risk Control (GBaR) team has employed a differentiated volatility-targeting investment approach that seeks to harness the power of risk.

As market conditions warrant, the team dynamically adjusts the portfolio's mix of equities, fixed income, commodity-linked assets and cash, to align with the agreed risk target on an ongoing basis. We typically adjust the broad asset mix 1-2 times each month, based on anticipated event risks. However, in extreme markets we may need to adjust positions more frequently, to maintain a stable risk profile.

The GBaR team's risk-targeted asset allocation process is consistently applied to all portfolios, but tailored to client-specific guidelines and objectives. All GBaR portfolios are managed according to the following 3-stage investment process: