Our stock selection process is core to the management of risk. Moreover, though we use the MSCI to measure relative performance, risk in our view is not solely relative performance versus a benchmark - but also the prospect of losing money (ie. absolute returns).

As a result of our stock picking and relatively concentrated portfolios, the key risks relate to individual stock positions. We attempt to manage this by means of intensive research and subsequent scrutiny by the peer group. Our particular focus on companies which are out of favour and our concern with the potential for absolute loss in a stock, goes a long way toward reducing risk in the portfolio. Within the portfolio, care is taken to avoid excessive exposure to areas that have a high co-variance. This may be considered by industry or country. Within a country, there are other considerations such as, among others, susceptibility to currency fluctuations, interest rates and government actions. At the industry level, consideration will be given to the nature of its structure, such as concentration, cyclicality, relative maturity, threat of substitution and so on. Regular analysis highlights the characterisation of the portfolio under geographic, industry, emerging market, liquidity and occasional other headings.

From time to time, Platinum may utilise derivatives to manage risk and this can play quite an important role in our investment process. Typical usage of derivatives would be:

	To reduce market risk in the portfolio by selling index futures or buying index put options
	To reduce the cost and/or possible downside of holding a given stock through purchase of call options or warrants over a security rather than the actual security
	Where we have identified stocks that we believe to be overvalued, we may purchase put options over that stock or short sell the stock

In respect of the Platinum Unhedged Fund, there will be no market risk management undertaken ie. no short selling of indices or stocks.