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85% IRR Quantitative Protection Strategy

Imagine a holistic hedging strategy that protects your equity index portfolio from sharp market downturns while concurrently enhancing alpha.

This audited strategy historically produced 85% IRR on capital over the past 12 years. This translates into an annualized alpha over the S&P 500 index by 2% for the hedged Assets Under Protection.*

The Quantitative Left Tail strategy is a sophisticated risk mitigation strategy in which options are actively managed to maximize convexity — defined by maximizing the payoff in a market crash while constraining hedging costs in the absence of a crash.

Important Risk Mitigation Criteria:

  • Stand-alone vehicle: A separate fund or managed account allows for the segregation of assets and custom profit-taking decisions.

  • No OTC risk: the strategy is designed to trade listed securities only and therefore has no counterparty risk except for with the exchanges.

  • Liquidity in a crisis:  Investors can wire out excess cash above margin requirements daily to reinvest in equities at the low market level or to cash out and fund their liabilities.

  • Allows to quantify maximum draw-down:  The worst-case scenario for the fund is limited to the capital invested which is generally 2%.

  • Basis risk: The strategy is not designed to assume basis risk or correlation assumptions in structuring the hedge for investors.

 

*Audit conducted by Ernst & Young LLP in accordance with attestation standards established by the American Institute of Certified Public Accountants. Comparison to the S&P500 assumes an allocation of 2.5% of the assets under protection in the hedging strategy.

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