I've been managing money at hedge funds and a family office for most of my career. In that time, how best to manage risk has been at the centre of many debates.

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For some, looking at historical risk is considered the best way to allocate capital. Whether that involves comparing prior performance to a benchmark or looking at historical volatility or VaR, there are many strengths to taking this stance. It helps investors or traders put historical returns in context and understand where they have come from.

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However, for me, I lean towards forward looking risk measures as I want to know what could happen to my current portfolio, not necessarily what has happened to my portfolio.

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Specifically, I focus on the potential P&L impact based on my current holdings as that tells me more about what may come than what has gone before. By focusing on P&L, as opposed to return, I can quantify my gains or losses against specific capital sums to see whether my asset or instrument allocation marries up to my risk tolerance.

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For example, if I look at my top 5 exposures, I consider the volatility of each instrument and make an informed estimate about the potential P&L impact I could face. I can then examine the percentage allocation of my total NAV to see how these top exposures are going to shift the overall performance and whether I am happy with a certain amount of concentration risk.

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In addition to the traditional approach of 95% or 99% VaR which captures extreme moves, I use historic events to see what a repeat of those might mean for the current set of positions. The final aspect of this is a static stress test which projects the likely portfolio outcome. This remains static because it then allows me to track and compare my exposures over time.

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This forward looking analysis helps to ensure future portfolio performance is well thought out and irons out any weakness in the current portfolio structure.

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It is with this mindset that we built illio. Although we incorporate historical risk measures, our focus on the future allows users to contextualize swings in P&L and make rational choices in the face of volatile markets. Additionally we have a powerful Insight engine which highlights aspects in the portfolio that might not be obvious but yet may have a powerful impact on the future value of their portfolio.

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It's hard for the individual investor to consider their portfolio from every angle like a professional fund manager would. However, at least with our Insights, they will get the same answers that a professional might when analyzing their portfolio.