Risk Management

Risk = The degree of uncertainty regarding the durability of a business’ earning power

KAR’s investment approach identifies the highest quality companies with competitive advantages and with little individual business risk. We believe, and our results have shown, that a high conviction portfolio of these companies which maintain strong market positions and little to no debt will experience less market risk than a traditional portfolio, provided that they are purchased at attractive prices. View the portfolios we’ve built through our careful application of risk management principles.

White Paper: The Hows and Whys of Quality Investing

Risk Management Guidelines

Investment Oversight

Investment Philosophy

Focus on “high-quality” companies

Company’s ”business risk” is primary risk control factor

Portfolio Level Controls

Fully diversified portfolio by sector and country (if applicable)

Individual security weights initiated at 1% to 5% of portfolio

Position Reviews

”Position Review” report when a portfolio holding declines 20% absent a broad market decline

Re-validate reasons for original purchase or sell position

Trading Guidelines

Guidelines provided by Portfolio Managers when entering and exiting portfolio holdings

Relative benchmarks and transaction costs are monitored in real time to ensure investments are implemented both efficiently and effectively

Independent Oversight

Risk and Compliance Committee

Oversees all business and regulatory risk

Portfolio Oversight Committee

(Reports to Risk and Compliance Committee)

Oversees all investment and strategy risk

Performance, Analytics & Risk Department

Produces all reporting and quantitative measures of risk

Risk Management Systems

FactSet Attribution and Performance Analytics

MSCI Barra Risk Model

ICE Liquidity Risk Management.