In times of uncertainty, asset owners need to employ agile tail-risk hedging strategies and be more dynamic with their investment allocations. But by definition, tail risks are rare, which makes them exceedingly difficult to prepare for.
Liquid alternative solutions that combine trend following with directional and relative value strategies can be advantageous diversifiers in any market environment.
LIQUID ALTERNATIVEs
A dynamic multi-asset defensive solution that uses macro tail risk and capital preservation to address volatile market environments can provide reliable diversification.
MULTI-ASSET
Monitoring leverage, collateral arrangements, and liquidity positions through these shocks can help investors avoid becoming a forced seller while the event is unfolding.
MONITORING POSITIONS
Investors should also consider stress testing as opposed to looking at traditional statistical measures that make assumptions that may not be realistic for some exposures.
STRESS TESTING
Remaining diversified across asset classes, investment styles, and time frames, and choosing solutions with a low beta to traditional markets over a full market cycle, remains imperative.
DIVERSIFICATION