Tail Hedging I – An intro to Systematic Defensive Strategies

Investors have been lucky over the last 30 years. As bond yields entered into a secular down trend (in a disinflationary context), they benefitted from an insurance that simultaneously paid them. By buying government bonds, they enjoyed overall positive returns, particularly during hard times for growth assets (so-called flight-to-quality episodes). With bond yields close to rock bottom levels, such a dream scenario might not happen again, or not to the same extent

Inflation Strikes Back: Should Alternative Risk Premia Investors Care?

As inflation soars to levels not seen in the past thirty years, what does this mean for alternative risk premia (ARP) investors? In this paper, we add to the sparse literature on inflation impacts on ARP by expanding the universe of ARP analysed. We observe outperformance by carry strategies and Equity Momentum in inflationary times, whereas mean-reverting macro directional strategies and Equity Low Risk seem to underperform. Meanwhile, we observe more muted impacts for other ARP. For a well-diversified ARP portfolio, the performance dispersion results in an overall subdued difference in performance between inflationary and non-inflationary periods, suggesting that inflation shocks should be seen more as a relative risk/opportunity than an absolute one for these liquid alternative strategies.

Active vs passive low risk investing

The scientific foundations for low volatility investing were laid almost 70 years ago and are well understood, but investors are …

Risk-Based Investing but What Risk(s)?

In this article, we propose a generalised, expected shortfall risk-budgeting investment framework that, in a simple and flexible way, can …