Managing the Downside of Active and Passive Strategies: Convexity and Fragilities
Question of the day: how to manage a large (or small) portfolio in low interest rate conditions, while equity markets bear significant draw-down risk? More generally, how to build an “antifragile” portfolio that can weather the most extreme market scenarios without impacting long-term performances? Do active strategies systematically create or increase already existing market instabilities?
How to invest in 2019 accounting for the possibility of a crisis?
MFA Visual Communication, Certified Instructing Adults Curriculum Developer/Facilitator for corporate, non-profit, and academic programs. Evolutionary thinker, integrating the creative process with scientific evidence.
5 年This works for me: "For a marginal investor, an active strategy that anticipates major market downturns and cleverly selects sectors or securities will produce superior long-term returns while tempering the downside, makes a lot of sense. Marginal investors main question is the quality of their market risk prediction and security selection."
Partner at Avenue Living
5 年Super article. Idées bien claires et concises. Merci!
Macro Alpha Generator │ System Dynamics Practitioner
5 年Hold a long Beta portfolio and dynamically-hedge your drawdown risk using Delta-1 Futures...the key is the timing of the hedge implementation/unwinding...see below for a non-linear tool: