The National Strategic Investment Dialogue, 2007

The National Strategic Investment Dialogue (NSID) is an annual national series of discussions among fiduciaries and leaders of the investment community to address issues of vital importance to institutional investors. During 2007, the focus of the program was:

Profiting From Risk:
Emerging Challenges, Strategies and the Search for the Optimum Portfolio

The National Strategic Investment Dialogue (NSID), a series of two separate day-long discussions held in Washington D.C. and San Francisco, brought together selected groups of respected fiduciaries and leaders of the investment community. The purpose was to examine and debate the challenges, complexities and innovation associated with managing portfolios.

During each session, program participants explored issues driving the sea change that is transforming the investment world. Specifically, the program considered how our concepts of risk are changing and how we can alter our views to embrace and build upon the opportunities that greater understanding of risk can bring. Specific focus was placed on how investors can systematically identify the risks they face including those hidden risks that are often overlooked and new sources that are emerging. From liquidity risk to volatility, from counterparty risk to process risk, the discussion challenged old assumptions and tested traditional theories against evolving realities. Participants also explored how new investment vehicles and strategies are changing the risk equation with attention devoted to complex hedging strategies, the increasing use of derivatives and the globalization of asset allocation. With diversification classically cited as one of the best ways of managing risk, one session addressed the new challenges that have emerged as highly correlated markets make traditional diversification extremely difficult. In addition, new techniques for buying and selling volatility and liquidity were explored as such approaches can play a very useful role in next-generation risk management efforts. Finally, the objective of the discussions was, as in all NSID events, to seek effective, practical strategies or to identify new investment concepts for participants as they work to shape their assets into what might be characterized as the "optimum portfolio."

Participants were culled from a variety of organizations and represented a broad range of investment professionals, including money managers, plan sponsors, foundation and endowment investors, board members, and third-party service providers.