Connected Investor - The Brunner Investment Trust PLC Podcast
Jul 22, 2026 · 16 min · 9 segments
In investing, risk is often measured against a benchmark or by day-to-day market volatility. But is that really what matters most? In this episode of *Connected Investor*, Brunner Investment Trust's…
Julian BishopHost
James AshworthHost
And for many investors, they think about the risk as the risk of performing worse than that benchmark.
Other investors will think about risk as volatility, literally how much their portfolio or their asset goes up or down in value.
But for us as long-term investors, we think that actually the most important thing, the risk we really care about is the risk of losing money permanently, permanent impairment of capital.
And in the investment world, you have something called relative risk, which is how you think about your investment performance versus a benchmark.
And you have absolute risk, which is actually the risk of losing a lot of money.
If you're an investor who is tracked relative to a benchmark, you can reduce relative risk to nothing by just replicating the benchmark.
But at the same time, if you do that, there may be positions and stocks that you buy that actually you don't believe in, you don't think are attractive investments.
And so you might be actually increasing your absolute risk by buying these equities, these shares in companies that you don't believe in and you don't think are attractive investments, just because by doing so, you reduce so-called relative risk.
I seem to remember a conversation I had with a risk department, a former employer actually.
And they said, to reduce risk, meaning relative risk, you need to buy all these things.
And then they pointed to me towards a bunch of what I thought were very, very fundamentally risky equities.
A lot of the industry is focused on this notion of relative risk, as opposed to absolute risk.
And for many investors, they think about the risk as the risk of performing worse than that benchmark.
Other investors will think about risk as volatility, literally how much their portfolio or their asset goes up or down in value.
But for us as long-term investors, we think that actually the most important thing, the risk we really care about is the risk of losing money permanently, permanent impairment of capital.
And in the investment world, you have something called relative risk, which is how you think about your investment performance versus a benchmark.
And you have absolute risk, which is actually the risk of losing a lot of money.
If you're an investor who is tracked relative to a benchmark, you can reduce relative risk to nothing by just replicating the benchmark.
But at the same time, if you do that, there may be positions and stocks that you buy that actually you don't believe in, you don't think are attractive investments.
And so you might be actually increasing your absolute risk by buying these equities, these shares in companies that you don't believe in and you don't think are attractive investments, just because by doing so, you reduce so-called relative risk.
I seem to remember a conversation I had with a risk department, a former employer actually.
And they said, to reduce risk, meaning relative risk, you need to buy all these things.
And then they pointed to me towards a bunch of what I thought were very, very fundamentally risky equities.
A lot of the industry is focused on this notion of relative risk, as opposed to absolute risk.
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