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IPS VOLATILITY HEDGE
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Investing with the protection of a dependable, low-cost portfolio tail hedge against the threat of exogenous events such as the 1987 crash, 2008 credit crisis, 2011 European crisis, and the Covid-19 crisis is especially imperative when zero interest rate environments make bonds ineffective as a hedge.
The IPS Volatility Hedge enables investing with the protection of a hedge with defined cost and has proven to be extremely effective during market crashes. The graph below shows how a de minimis allocation to the IPS Volatility Hedge in a 100% long portfolio would have resulted in a gain of 8.2% when the market was down -33% at its low point in March 2020.
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The graph above shows how just a small allocation of the IPS Volatility Hedge into a traditional
60/40 portfolio can dramatically hedge downside risk with almost no carry cost.
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How can the IPS Volatility Hedge be so effective? By allocating VIX call options along the horizonal skew,
we are able to minimize the roll cost when the term structure moves from Contango to Backwardation.
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Click above for an in-depth analysis of how we implement
the volatility hedge for our institutional clients.
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Disclaimer
Please note that the information contained in this piece is intended for investment professionals. This information should not be misconstrued as an offer to buy or sell, or a solicitation to buy or sell securities. Any performance contained in this article is strictly informational and is not necessarily indicative of the future performance of investments. Past performance is not indicative of future investment performance and investors should always consult a financial professional prior to making any investment decisions.
The results shown here are strictly for informational and educational purposes. All investments have the potential for profit and the potential risk of loss. Changes in investment strategies, contributions, or withdrawals may cause the performance results of one’s portfolio to differ materially from the reported composite performance. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s portfolio. One should always consult an investment advisor before making any investment decisions.
Disclosures
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