One of the most common questions we hear is about the consistency of our risk ratings over time. Wealth managers need clients invested in solutions aligned with their Risk Tolerance, but frequent changes in risk ratings force unnecessary portfolio adjustments. This wastes advisers’ time, inconveniences investors, and—most critically—risks clients being in unsuitable portfolios for significant parts of their investment journey. Why? Because they’re essentially driving while looking in the rear-view mirror.
But there’s a better way.
KIID regulations require a 5-year rolling volatility window as a baseline for risk measurement. Using this as a benchmark, we’ve compared it to OxfordRisk’s forward-looking risk mapping approach. The difference is striking.
Over the past 20 years, portfolios relying on 5-year historic volatility would have seen their risk band shift seven times.Worse, in periods of market turmoil like 2007–2009, there were three consecutive years of risk category changes. This kind of instability creates headaches for advisers and can lead to reactionary, suboptimal decisions for investors.
At Oxford Risk, we do things differently. Instead of relying solely on backward-looking historical volatility, we take a forward-looking approach. By repurposing historical asset data, we simulate thousands of potential return paths over the next 10 years. This methodology integrates long-term historical returns without assuming the future will replicate the past.
The result? A more stable and meaningful measure of portfolio risk. Over the last two decades, our risk scores for the same portfolio have fluctuated slightly but have never shifted categories.
At Oxford Risk, we believe in a long-term approach to investing, and our risk mapping reflects this philosophy. A forward-looking approach doesn’t just avoid the instability of historical measures; it ensures clients are better matched to the portfolios that suit their needs—today and in the future.
Let’s leave the rear-view mirror for driving and adopt a clearer, forward-facing approach to risk.
If you’d like to learn more about risk mapping funds with Oxford Risk, please get in touch at sales@oxfordrisk.com.
