If there is one thing to be learned from this year’s drawdowns in U.S. equities, it’s that traditional 60/40 portfolios do a comparatively poor job of limiting portfolio losses in the short run. Bradley Krom highlights how investors can combine a dynamic long/short equity strategy with a dynamic bearish strategy to achieve comparable returns with less risk to traditional portfolios.
Many experienced investors understand that lack of variability doesn’t necessarily equate to stability. So far this year, VIX has averaged close to 17.5, including a massive 100% spike in February. Call it a reversal to normal standards or something else, but we believe higher VIX is likely here to stay for some time.
With anxieties over market valuations and the “quantitative tightening” program under way by the Federal Reserve, it can be useful to evaluate strategies that have a goal of reducing volatility in the marketplace.
Over the last several years, we’ve seen an increased interest in strategies that can serve as alternatives to a standard equity and bond portfolio. While these strategies can be used in isolation, we’ve found that creating a portfolio of alternative assets can provide a compelling range of risk and return profiles.