Discuss the financial risks created by an institutional investor's chosen portfolio strategy

Financial risks start with market risk, meaning exposure to equity, interest rate, credit and currency movements, and the correlations among them, which tend to rise in crises. Liquidity risk is central when the strategy includes private markets or direct investments that cannot be sold quickly, especially if the institution must fund spending or government transfers. Concentration risk appears when a fund holds large stakes in a few companies, sectors or its own economy. Counterparty risk arises in derivatives and co-investments. For a sovereign wealth fund, risks should be assessed against its purpose and the government's other exposures: a fund backed by commodity revenue should avoid adding commodity risk. A trap is analysing assets in isolation from the sponsor's balance sheet.