Multi-portfolio management platforms combine a diverse set of investment strategies under one roof — a diversity where risk management becomes both essential and intricate, said Mehmet Bayraktar, chief risk officer at AllianceBernstein Arya Partners, during a session at the Canadian Investment Review’s 2025 Risk Management Conference.
“That whole idea of complementing and coming up with a full suite of portfolio managers covering different strategies is where risk management plays a critical role.”
Addressing the art of capital allocation within a multi-PM framework, Bayraktar noted discretionary and systematic managers naturally introduce diversification, but asset owners must decide how to tilt allocations.
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“Some of the portfolio managers are experienced, they have high risk-adjusted performances [and] they deserve overweight allocations. Other managers are emerging, they’re looking to build credibility and it makes sense for them to be underweighted.”
Even modest correlations between managers can dramatically reduce the platform’s overall Sharpe ratio, he said, illustrating how a platform with 50 portfolio managers could effectively behave like one with only 25 if average correlations hit 10 per cent.
“Even if you have 25 managers, the expected Sharpe of the overall platform could be nearly halved if they’re not truly uncorrelated.”
To make multi-PM platforms work, Bayraktar advocated for a robust risk management framework that includes: drawdown limits aligned with investor expectations; factor-aware risk guidelines that account for fat tails and asymmetry; real-time monitoring of live and predicted drawdowns; and proactive engagement with portfolio managers to avoid limit breaches.
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He also stressed the importance of having a hedge program ready to bring the platform within risk limits when required.
Bayraktar also noted the platform’s risk-adjusted performance is further enhanced through systematic strategies that complement fundamental bets, centre books that fine-tune exposures, custom hedging that manages risk without diluting core investment theses and risk-advisory services to portfolio managers on drawdown and concentration management.
One of the most pressing concerns in multi-PM structures is crowding risk—when too many institutional investors pile into similar trades relative to available liquidity, he said, noting this can amplify volatility and create systemic vulnerabilities. Bayraktar emphasized that asset allocators must weigh the benefits of uncorrelated alpha streams against the liquidity constraints of the platform.
He also shared a cautionary note on crowding and liquidity risks, citing past events like the 2007 quant crunch and the 2021 meme stock squeeze. He recommended using crowding factor models enriched with third-party and broker data to stay ahead of potential dislocations.
Read more coverage of the 2025 Risk Management Conference.