Alternatives, Private Markets and Structured Strategies

Introduction and Context

Alternative investments are assets and strategies that sit outside traditional long-only holdings of listed equities, government bonds and investment-grade credit. They include real estate, private equity, venture capital, private credit, infrastructure, commodities, hedge funds and structured products. For wealth managers and institutional investors, alternatives are not a single asset class. They represent different combinations of economic exposure, liquidity, leverage, governance rights, valuation uncertainty and compensation structures.

The central portfolio question is not whether alternatives are intrinsically superior to public markets. It is whether a particular alternative exposure improves the portfolio’s risk-adjusted objectives after fees, taxes, liquidity constraints, operational risks and implementation costs. A private equity fund, for example, may offer access to an illiquidity premium and active ownership, but it also involves capital calls, uncertain valuations, long holding periods and performance dispersion. A structured note may provide defined downside protection, but its payoff depends on the issuer’s creditworthiness, embedded options and the exact terms of the contract.

This chapter develops an analytical framework for assessing alternatives. It emphasizes economic substance rather than labels: the investor should identify the underlying risk factors, cash-flow pattern, leverage, liquidity, valuation method, fee burden, legal structure and role in the total portfolio.

Learning Objectives

After completing this chapter, the reader should be able to:

1. Distinguish major alternative investment categories and explain their economic drivers.
2. Evaluate leverage, illiquidity, valuation and fee structures.
3. Explain the investment and portfolio roles of private markets, hedge funds, commodities and structured products.
4. Apply due-diligence frameworks to managers, funds, assets and counterparties.
5. Interpret private-market performance measures and identify their limitations.
6. Analyse governance, suitability, regulatory, ethical and operational risks.
7. Construct a reasoned recommendation for an alternatives allocation.

1. A Framework for Analysing Alternatives

A useful assessment begins with seven questions:

The portfolio role should then be stated precisely. Alternatives may provide:

• Growth: private equity, venture capital and certain real estate strategies.
• Income: private credit, core real estate and infrastructure debt.
• Diversification: macro hedge funds, commodities and selected infrastructure.
• Inflation sensitivity: real assets, commodity exposures and inflation-linked contracts.
• Downside management: certain relative-value, market-neutral and principal-protected structures, subject to model and counterparty risk.
• Access to control or complexity premia: active ownership, origination, restructuring and specialist sourcing.

These roles are not guaranteed. A leveraged property fund may behave like an equity risk asset during a recession; a credit fund may be exposed to equity-like loss in a default cycle; and a structured product marketed as defensive can lose substantially if protection is conditional or the issuer defaults.

2. Private Markets and the Economics of Illiquidity

Private markets involve investments whose securities or claims are not continuously traded on public exchanges. Private equity and venture capital usually use closed-end limited partnerships. Investors commit capital, the general partner draws capital over time, manages investments and eventually exits them. Private credit may be structured as a closed-end fund, interval fund, separately managed account or direct loan portfolio.

2.1 The J-curve and capital deployment

Private-market funds often exhibit a J-curve. Early net returns may be negative because management fees, organisational expenses and unrealised losses precede distributions. Later returns can improve as portfolio companies grow and are sold. The J-curve is not a law of nature: it depends on entry valuations, fee design, exit markets, pace of investment and the manager’s ability to create value.

A commitment is not the same as an investment. If an investor commits 10 million currency units but the fund calls only 7 million, the remaining 3 million is an uncalled commitment and must remain available. Portfolio construction must therefore consider both invested capital and contingent liquidity needs.

2.2 Performance measurement

The internal rate of return (IRR) is the discount rate that sets the net present value of investor cash flows to zero:

Here, CF_t is the investor cash flow at time t, and n is the final period. Contributions are normally negative and distributions positive. IRR assumes that interim cash flows can be reinvested at the IRR, an assumption that may be unrealistic. It is also sensitive to timing and can be misleading when comparing funds with different distribution patterns.

The multiple on invested capital (MOIC) is:

MOIC has no time dimension. A 2.0× multiple achieved in four years is economically different from the same multiple achieved in twelve years. Public-market equivalent methods attempt to compare private-market cash flows with a public benchmark, but results depend on the selected benchmark, timing convention and treatment of risk.

2.3 Leverage

Leverage magnifies both gains and losses. For a simple asset financed with debt, the equity return before fees and taxes can be approximated as:

where V₀ and V₁ are initial and final asset values, I is operating income, D₀ and D₁ are opening and closing debt, and E₀ is initial equity. This relationship assumes a consistent valuation basis and ignores taxes, transaction costs and interim financing flows. A fall in asset value can produce a much larger percentage fall in equity value when debt is substantial.

Leverage may occur at asset level, fund level, portfolio-company level or through derivatives. Due diligence must examine maximum permitted leverage, actual leverage, covenants, margin calls, refinancing dates and cross-collateralisation.

3. Real Estate

Real estate returns generally combine rental income, changes in operating income and changes in capitalisation rates. Core properties are typically stabilised, income-producing assets with lower leverage. Value-add strategies seek operational or physical improvements. Opportunistic strategies may involve development, distressed assets or substantial leverage.

A simplified property valuation based on capitalisation of stabilised net operating income is:

NOI is stabilised net operating income, and the capitalisation rate is the required income yield for comparable property risk. The formula assumes a stabilised income stream and a market-consistent capitalisation rate. It is not appropriate for a property with highly volatile, rapidly growing or negative operating income without further modelling.

Real estate due diligence should cover location, tenant concentration, lease maturity, rent indexation, vacancy, maintenance expenditure, environmental liabilities, zoning, insurance, property taxes, financing terms and the quality of the external valuer. Appraisal-based valuations may smooth reported volatility because appraisals are periodic and use judgement. Consequently, measured correlation with listed markets may understate economic correlation during stress.

4. Private Equity and Venture Capital

Private equity generally acquires substantial or controlling interests in mature or developing companies. Value creation may arise from revenue growth, margin improvement, operational restructuring, strategic repositioning, acquisition programmes and capital-structure optimisation. Venture capital finances young firms with uncertain technology, market adoption and business models. Venture returns are usually highly skewed: a small number of investments can generate a large share of total fund performance.

Private equity analysis should distinguish:

• Entry valuation risk: paying too much reduces future returns.
• Business risk: the company may fail to meet operating assumptions.
• Leverage risk: debt service can constrain investment and resilience.
• Exit risk: the assumed buyer, valuation multiple or public market may not be available.
• Agency and governance risk: incentives may not align among founders, sponsors, lenders and limited partners.

A simplified leveraged buyout return bridge separates operating performance, change in valuation multiple, debt paydown and leverage effects. Such a bridge is an analytical decomposition, not a prediction. It must be tested under adverse revenue, margin, interest-rate and exit-multiple assumptions.

Venture-capital due diligence requires particular attention to intellectual property ownership, founder incentives, customer concentration, regulatory permissions, cash burn, runway, product-market fit, liquidation preferences and future financing needs. Reported valuations in venture portfolios may remain unchanged between funding rounds even while the economic outlook changes materially.

5. Private Credit

Private credit involves lending directly to companies, projects or individuals outside traditional syndicated public markets. Strategies include direct lending, mezzanine finance, distressed debt, asset-backed lending and special situations. Return sources generally include contractual interest, original-issue discount, fees, prepayment income and recovery value.

Credit analysis should assess:

1. Borrower cash-flow capacity and debt-service coverage.
2. Leverage and expected deleveraging.
3. Collateral quality, priority and enforceability.
4. Covenants and lender control rights.
5. Sponsor support and refinancing dependence.
6. Industry cyclicality and concentration.
7. Manager workout capability and valuation independence.

A basic debt-service coverage ratio is:

A ratio above 1 indicates coverage in the stated period, but it does not guarantee repayment. The definition of cash flow and the treatment of maintenance capital expenditure must be examined carefully. Private credit can appear stable because loans are valued using models or marks rather than continuous market prices. Stability of reported net asset value should not be confused with absence of economic risk.

6. Infrastructure

Infrastructure assets provide essential services or networks, including transport, energy, utilities, digital infrastructure and social infrastructure. Their risk depends on whether revenue is regulated, contracted, availability-based, volume-sensitive or merchant-priced.

Infrastructure may offer long-duration cash flows and potential inflation linkage, but risks include construction delay, political intervention, regulatory change, technology substitution, demand shortfall, environmental liabilities and refinancing exposure. A wind farm with a long-term power-purchase agreement has a different risk profile from a merchant power plant. A toll road’s revenue may depend heavily on traffic volume and competing routes.

Investors should separate asset quality from concession quality and manager quality. A high-quality physical asset can still produce poor returns if acquired at an excessive price or financed imprudently.

7. Commodities and Real Assets

Commodity returns may arise from spot-price movements, futures-curve effects, collateral income and active trading. A futures-based commodity index does not simply replicate ownership of physical commodities. If futures prices exceed expected future spot prices, the market may be in contango and rolling contracts can reduce returns. Backwardation can have the opposite effect, although it is not guaranteed.

Commodity exposure can diversify inflation and supply-shock risks, but commodities generate no contractual cash flow like rent or coupon income. They may also be volatile and sensitive to geopolitics, weather, inventory levels, technology and currency movements. Physical commodity investments add storage, insurance, transportation and quality risks.

8. Hedge Funds

Hedge funds are better understood by strategy than by legal label. Major strategies include equity long/short, event-driven, global macro, relative value, merger arbitrage, managed futures and credit strategies.

Their potential contribution is often expressed as alternative sources of return, lower directional beta or dynamic risk management. Yet apparent diversification may disappear in crises. Common risks include crowded trades, short squeezes, derivatives exposure, financing withdrawal, model risk, liquidity mismatch and incentive-driven risk taking.

The Sharpe ratio is often used as a risk-adjusted measure:

where R_p is portfolio return, R_f is the risk-free return over the same period, and σ_p is the standard deviation of portfolio returns. The measure assumes that volatility is a meaningful risk proxy and that returns are comparable over the measurement horizon. It can overstate the attractiveness of illiquid or smoothed returns and does not capture skewness, tail risk or liquidity risk.

Hedge-fund due diligence must examine prime-broker arrangements, independent administration, custody, valuation policy, redemption gates, side pockets, leverage, short-sale practices, key-person dependence and incentive compensation.

9. Structured Products

Structured products combine a host instrument, often a debt obligation, with derivatives. Examples include principal-protected notes, autocallables, reverse convertibles, participation notes and credit-linked notes. The investor’s payoff is determined by a legal formula rather than by simple ownership of the reference asset.

For any structured product, the investor should identify:

• Reference asset or index.
• Maturity and observation dates.
• Coupon conditions.
• Barrier levels and whether they are monitored continuously or at maturity.
• Participation and loss rates.
• Callability and reinvestment risk.
• Issuer credit exposure.
• Secondary-market terms and embedded fees.
• Tax and documentation consequences.

A note promising a 10% coupon may compensate the investor for accepting equity downside, issuer credit risk and limited liquidity. Yield must therefore be decomposed into compensation for time value, credit risk, volatility exposure, complexity and fees.

For a simple protective put strategy, the payoff at maturity can be represented as:

where S_T is the reference asset price at maturity and K is the strike price. The formula applies only to the put option itself and excludes the cost of purchasing it. A structured note may combine this option with bonds, calls, barriers and issuer obligations; its payoff cannot be inferred from one component alone.

10. Fees, Valuation and Net Performance

Alternative investments often have layered fees. These can include management fees on committed or invested capital, performance fees, carried interest, acquisition and monitoring fees, fund expenses, financing costs, administration, custody, legal fees and portfolio-company expenses.

The relevant measure is net investor outcome. A high gross return may be unattractive after fees, taxes, capital-call financing and illiquidity. Fee analysis should ask:

• Is the management fee charged on commitments, invested capital or net asset value?
• Is carried interest calculated deal by deal or after whole-fund performance?
• Is there a preferred return or hurdle?
• Is carried interest subject to a clawback?
• Are transaction and monitoring fees offset against management fees?
• Are valuation and administration costs borne by investors?

Private assets are commonly valued using market, income or cost approaches. Model-based valuation is legitimate when markets are inactive, but it increases reliance on assumptions. Independent valuation, clear valuation committees, documented overrides and appropriate audit procedures are essential. Investors should distinguish valuation uncertainty from fraud; both require controls, but they are different problems.

11. Due Diligence and Portfolio Construction

A professional due-diligence process should be multidisciplinary.

Investment due diligence

Assess strategy coherence, sourcing advantage, portfolio construction, underwriting discipline, historical attribution, loss experience, concentration and stress testing. Performance should be examined across realised and unrealised investments and compared with relevant benchmarks.

Operational due diligence

Review legal structure, ownership, governance, compliance, cybersecurity, business continuity, valuation, reconciliation, cash controls, service providers and regulatory history. Operational weakness can destroy otherwise attractive investment performance.

Manager and team assessment

Examine experience in the exact strategy, staff retention, succession, decision rights, personal investment, conflicts and capacity. Past performance should be attributed to team members and distinguish market beta from repeatable skill.

Portfolio construction

Allocation should consider total exposure rather than fund labels. A portfolio may unknowingly concentrate in the same technology sector, sponsor, borrower, geography, financing source or macroeconomic factor. Liquidity planning should model ordinary distributions, delayed exits, capital calls, margin requirements and adverse scenarios.

A simple commitment liquidity budget can be expressed as:

This is a planning identity, not a universal regulatory ratio. Each term must be defined consistently and stress assumptions must reflect the investor’s horizon and liabilities.

12. Illustrative Case: Northbridge Family Office

Background

Northbridge Family Office has 100 million currency units in investable assets. It considers committing 8 million to a private-equity fund, 5 million to private credit, 4 million to infrastructure and 3 million to a market-neutral hedge fund. The family has annual spending needs of 4 million and already owns concentrated public equity in a technology company.

Problem

The proposed alternatives allocation appears diversified by label, but the family must determine whether it can meet capital calls and tolerate delayed distributions. It must also assess overlap with its technology concentration and understand the effect of fees and leverage.

Analysis

The private-equity fund charges a management fee on committed capital and carried interest after a preferred return. Its portfolio includes software and healthcare businesses, creating potential overlap with the family’s existing technology exposure. The private-credit fund has floating-rate loans, but several borrowers depend on refinancing within three years. Infrastructure commitments are diversified by asset, but one-third of projected cash flow is merchant-priced rather than contracted. The hedge fund uses derivatives and can impose a redemption gate during stressed conditions.

Northbridge constructs a five-year cash-flow model using base, delayed-exit and stress scenarios. The stress case assumes slower private-equity distributions, higher capital calls, a credit default, reduced infrastructure distributions and a hedge-fund gate. It also reviews the family’s liquid reserve after spending obligations rather than treating the entire public portfolio as immediately available.

Approach and solution

The family reduces the initial private-equity commitment, requires detailed capital-call reporting and negotiates enhanced transparency. It selects a private-credit manager with stronger covenants and lower borrower concentration. It rejects the infrastructure opportunity because the price does not compensate for merchant exposure. The hedge-fund allocation is retained at a smaller size after reviewing counterparty and liquidity terms. A written alternatives policy sets maximum exposure by strategy, manager, geography, liquidity bucket and underlying sector.

Outcome

The revised plan does not maximise headline diversification. Instead, it improves resilience by aligning commitments with liquidity capacity, reducing technology overlap and making illiquidity explicit. The family also establishes quarterly monitoring of unfunded commitments, valuation changes, leverage, covenant breaches, fees and scenario liquidity.

Learning points

1. Diversification by product name is not the same as diversification by risk factor.
2. Commitments create future liquidity demands.
3. Reported valuation stability may reflect appraisal or model smoothing.
4. Fees, leverage and refinancing assumptions must be analysed together.
5. Suitability depends on the investor’s liabilities and governance capacity.

13. Governance, Regulation and Ethics

Alternatives require strong governance because information is asymmetric and conflicts are significant. Managers may control valuation, fee allocation, financing, related-party transactions and exit timing. Ethical practice requires fair disclosure, accurate marketing, appropriate suitability assessment and prompt communication of adverse developments.

Regulatory obligations vary by jurisdiction, but common themes include investor eligibility, disclosure, valuation, custody, anti-money-laundering controls, marketing restrictions, fiduciary duties and reporting. Professional investors should not assume that regulation eliminates investment risk. Private-market products may have limited disclosure, restricted transfers and different investor protections from listed securities.

Environmental, social and governance analysis must be substantive rather than promotional. Relevant issues include worker safety, community impact, corruption, data privacy, climate transition, environmental remediation and supply-chain conduct. Green or impact claims should be supported by measurable objectives, baseline data, monitoring and credible reporting.

14. Technology and Contemporary Developments

Technology is changing sourcing, underwriting, monitoring and reporting. Machine-learning tools can identify patterns in financial statements, satellite images, property data, supply chains and customer behaviour. However, alternative-investment datasets are often sparse, non-stationary and subject to survivorship and selection bias. An algorithm trained on successful historical investments may fail when valuations, regulation or financing conditions change.

Digital platforms may improve access to private markets, but tokenisation does not automatically create liquidity, reduce valuation uncertainty or remove legal risks. Data governance, model validation, cybersecurity and human oversight remain essential. The appropriate principle is augmentation rather than blind automation: technology can support screening and monitoring, while investment committees remain accountable for judgement and fiduciary decisions.

Challenges and Limitations

Alternatives have several persistent limitations:

• Illiquidity can prevent timely rebalancing or exit.
• Valuations may be infrequent, model-dependent or stale.
• Leverage can amplify losses and create forced-sale risk.
• Fees can materially reduce net returns.
• Performance data may suffer from survivorship, backfill and selection bias.
• Fund-level returns may not represent the experience of a new investor.
• Legal terms can differ substantially across apparently similar products.
• Operational and counterparty failures may be difficult to detect.
• Tax treatment can depend on jurisdiction, vehicle and investor status.
• Complexity can create suitability and communication failures.

These limitations do not invalidate alternatives. They mean that expected return should be evaluated jointly with liquidity, transparency, governance capacity and the investor’s ability to bear permanent loss.

Best-Practice Checklist

Before approving an alternative investment, an investment committee should be able to answer:

1. What is the primary return driver?
2. What losses are plausible, and can they be permanent?
3. Where is leverage located and what triggers a liquidity event?
4. How are assets valued and independently verified?
5. What is the complete fee and expense burden?
6. What are the capital-call, lock-up, gate and exit provisions?
7. Which risks overlap with existing portfolio exposures?
8. What happens under recession, inflation, rate shock and delayed-exit scenarios?
9. Who controls the manager, fund, collateral and data?
10. Is the investment suitable given the investor’s liabilities, tax status and governance resources?

Chapter Summary

Alternative investments should be analysed through their economic exposures rather than their marketing labels. Real estate and infrastructure may provide income and real-asset exposure but remain sensitive to valuation, regulation, leverage and demand. Private equity and venture capital offer active ownership and growth potential but involve long horizons, dispersion, capital calls and uncertain exits. Private credit can generate contractual income while exposing investors to default, covenant, recovery and refinancing risk. Commodities may diversify inflation and supply shocks but have volatile prices and no inherent cash flow. Hedge funds use diverse strategies whose liquidity, leverage, derivatives and tail risks require manager-specific analysis. Structured products combine debt and derivatives, making payoff, issuer credit and embedded fees central to due diligence.

IRR and MOIC are useful but incomplete performance measures. Valuation stability may reflect smoothing rather than low economic risk. Leverage, fees, illiquidity and operational controls must be assessed together. A suitable allocation depends on the investor’s objectives, liabilities, liquidity capacity, governance and tolerance for complexity. The professional standard is disciplined due diligence, transparent scenario analysis, risk-factor diversification and continuous monitoring.

Key Terms

Alternative investment: An investment outside traditional listed equities, bonds and cash.

Capital call: A demand by a private fund for committed but not yet invested capital.

Carried interest: Performance-related compensation paid to a private-market manager.

Closed-end fund: A fund that generally accepts commitments during a defined period and returns capital through exits.

Commitment: The amount an investor agrees to provide to a private fund.

Contango: A futures-market condition in which later-dated contracts are priced above nearer contracts.

Due diligence: Systematic investigation of investment, manager, legal and operational risks.

Illiquidity premium: Expected compensation for bearing limited ability to sell promptly.

Internal rate of return: The discount rate that makes the net present value of investment cash flows equal to zero.

J-curve: The typical early negative and later improving pattern of private-fund net returns.

Leverage: The use of debt or derivatives to increase exposure relative to invested equity.

MOIC: Total value received and remaining divided by invested capital.

Net asset value: The reported value of a fund’s assets minus liabilities.

Private credit: Direct lending or non-public credit investment.

Private equity: Investment in private companies, commonly involving active ownership or control.

Structured product: A security combining a host instrument with derivative-linked payoff terms.

Valuation smoothing: Reduction in reported volatility caused by infrequent or model-based pricing.

Venture capital: Equity financing for early-stage or high-growth companies.

Review Questions

Short Answer Questions

1. Why is a private-market commitment different from invested capital?
2. State two limitations of IRR as a performance measure.
3. What are the principal sources of private-credit return?
4. Why can appraisal-based real-estate valuations understate risk?
5. Identify three items that should be reviewed in structured-product due diligence.

Long Answer Questions

1. Compare private equity, venture capital and private credit in terms of return drivers, liquidity, valuation and risk.
2. Explain how leverage affects the risk and return of real estate or infrastructure investments.
3. Discuss the role of hedge funds in a diversified portfolio and the limitations of the Sharpe ratio.
4. Develop a due-diligence framework for an institutional investment in a closed-end private fund.
5. Explain why fees, governance and valuation methodology are central to net investor outcomes.

Analytical / Application Questions

1. An investor has large unfunded private-market commitments and rising annual liabilities. Design a stress-testing framework to assess liquidity sufficiency.
2. A structured note offers a high coupon but exposes the investor to losses below a barrier and to issuer default. Analyse the sources of the coupon and determine what information is needed before purchase.
3. Construct a recommendation for an alternatives allocation for a family office with concentrated public equity, moderate spending needs and low tolerance for permanent loss. Justify the allocation by risk factor rather than product label.

Multiple Choice Questions with Answers

Question 1

Which statement best describes a private-fund commitment?

A. It is always equal to the amount invested immediately.

B. It is the amount the investor agrees to provide, which may be drawn over time.

C. It is the fund’s annual management fee.

D. It is the value of the fund’s realised portfolio only.

Correct Answer: B. It is the amount the investor agrees to provide, which may be drawn over time.

Question 2

What is a principal limitation of IRR when comparing private funds?

A. It cannot incorporate the timing of cash flows.

B. It has no relationship to investor cash flows.

C. It assumes interim cash flows can be reinvested at the calculated IRR.

D. It is measured only in currency units.

Correct Answer: C. It assumes interim cash flows can be reinvested at the calculated IRR.

Question 3

If stabilised NOI is 2 million and the capitalisation rate is 5%, the simplified property value is:

A. 10 million

B. 20 million

C. 40 million

D. 100 million

Correct Answer: C. 40 million

Question 4

Which risk is especially important in private credit?

A. Failure of a borrower to repay or refinance debt

B. Daily exchange trading interruption for every loan

C. Guaranteed loss from contango

D. Absence of any contractual cash flow

Correct Answer: A. Failure of a borrower to repay or refinance debt

Question 5

A commodity futures market in contango generally has:

A. Later-dated contracts priced above nearer contracts

B. Later-dated contracts priced below nearer contracts

C. No price differences across maturities

D. Only physically settled contracts

Correct Answer: A. Later-dated contracts priced above nearer contracts

Question 6

Which feature can make a hedge fund’s reported volatility appear artificially low?

A. Continuous exchange pricing

B. Frequent independent valuations

C. Model-based or infrequent valuation of illiquid positions

D. Absence of leverage

Correct Answer: C. Model-based or infrequent valuation of illiquid positions

Question 7

A structured product investor is directly exposed to which additional risk when the product is an unsecured note?

A. Issuer credit risk

B. Guaranteed commodity storage loss

C. Automatic ownership of voting shares

D. Elimination of all market risk

Correct Answer: A. Issuer credit risk

Question 8

Which item is most relevant to assessing a private-equity fund’s exit risk?

A. The colour of the fund’s branding

B. The availability of buyers and the assumed exit valuation

C. The investor’s historical bank balance only

D. The number of public holidays in the fund’s domicile

Correct Answer: B. The availability of buyers and the assumed exit valuation

Question 9

The Sharpe ratio divides excess portfolio return by:

A. Portfolio beta

B. Maximum drawdown

C. Portfolio standard deviation

D. Management fee

Correct Answer: C. Portfolio standard deviation

Question 10

Why should an investor analyse total portfolio exposures rather than only fund labels?

A. Different funds may share the same sector, borrower, geography or macroeconomic risk.

B. Fund labels always determine exact returns.

C. Labels eliminate the need for due diligence.

D. Private assets never overlap with public assets.

Correct Answer: A. Different funds may share the same sector, borrower, geography or macroeconomic risk.