X

Please update your browser.

For the best experience, we recommend that you use the latest version of Chrome, Internet Explorer, or Firefox.

Risk Management Philosophy

We believe investing in the private markets while protecting investment capital requires a structured and cohesive risk management process that concurrently applies both a top-down (discipline in portfolio construction) and bottom-up (selectivity in investments made) approach. Adams Street does not necessarily strive to be a low-risk investor but instead aims to maximize results relative to the level of risk undertaken.

Adams Street’s robust risk management framework ties closely to the firm’s top-down / bottom-up approach to portfolio construction, which we believe is key.

Investment Strategy, Risk Management, and Performance Reporting Capabilities

14

Investment Strategy, Risk Management, and Performance Reporting Professionals

200
+

Years of Combined Experience

40
+

Years of Proprietary Data and Analytics

Risk Management Framework

Adams Street views investment risk as “the uncertainty of achieving expected returns or expected cash flow over the life of a portfolio”. Investment risk is influenced by a variety of risk factors that are assessed and monitored across three buckets:

  • Macro-economic (Systematic) and Structural risk
  • Portfolio Construction risk
  • Investment Level (Idiosyncratic) risk

By grouping risk factors into these distinct buckets, our framework is aligned with, and managed alongside of, the portfolio construction process to achieve our goal of a risk/return balance.

Investment risk is governed via Adams Street’s Portfolio Construction Committee, managed from a top-down perspective by the Investment Strategy & Risk Management Team, and incorporated into bottom-up investment decision making by the respective investment team. This structure creates a cohesive process where each risk bucket is assessed and managed by the applicable team and elevated to the Portfolio Construction Committee as appropriate.

Cohesive Approach and Strict Processes

Adams Street Partners maintains various risk management controls that are intended to address risks that include business and operational risks, legal and regulatory risks, and reputational risks. These risk management controls are reflected in the policies and procedures of relevant teams within Adams Street Partners, including:

Investment Strategy & Risk Management

Responsible for the analytics, risk management, and methodology that guide Adams Street Partners’ portfolio construction.

View Team

Performance Reporting & Analysis

Responsible for gathering, interpreting, analyzing, delivering, and communicating investment performance information in a timely and efficient manner while ensuring high data integrity.

View Team

Integrated Global Investment Teams

Continuous communication and collaboration within the investment teams to assess risk in connection with their investment decisions and ongoing monitoring of investments.

Learn More

Legal Team

Responsible for addressing the legal and regulatory risks that face Adams Street Partners’ business.

View Team

Finance Team

Responsible for investment accounting, valuations, cash management, and capital calls and distributions, and is expected to ensure the accuracy and timeliness of these operations.

View Team

Information Technology Team

Responsible for the effective operation and security of the information technology tools on which Adams Street Partners’ business relies.

View Team

Operational Due Diligence

At Adams Street, Operational Due Diligence (“ODD”) is integrated into the investment due diligence performed by each of the investment teams. The ODD personnel and process is independent of the investment teams and is performed in parallel with the investment due diligence. This independent review process assesses operational risks and validates controls in place that can mitigate a weak operational environment.

Included in our ODD process are the following:

  • Interviews
  • Document review
  • Verification of policies and procedures
  • Background checks and reference calls of general partners and/or management personnel from the target company.

Following an investment, the ODD professionals perform risk-based post-investment monitoring which includes surveys, phone calls, and onsite follow-up meetings to ensure the operational environment remains robust.

The Rise of ODD in Modern Private Equity Portfolios

Operational standards in private equity are on the rise; investors are taking note and expecting deeper analysis beyond investment risk. A thoughtful and structured approach to operational due diligence can identify and help mitigate risk that was historically overlooked. In this whitepaper we discuss recent examples of fraud and wrongdoing, post-investment monitoring practices, common operational pitfalls that can expose investors to losses, and staying on top of an evolving regulatory environment.

For further details on establishing an effective operational due diligence framework, access our most recent insights via the link below.

Read Our Insights

Learn More About Adams Street Partners