While it’s important to mitigate portfolio risk through diversification, that is often not enough to prevent losses over short periods of time. Spikes in correlation and volatility have historically reverted to a mean, giving experienced portfolio managers important signals on when to buy cheap positions. By preparing portfolios for more severe markets, investors stand a better chance of staying invested.

Options can be an effective tool to cushion portfolios from shocks, and can also increase the efficiency of multi-asset portfolios. These hedging strategies are a key element we use to manage our multi-asset portfolios and our Global Allocation Fund. These strategies can be designed to minimize cost and allow investors to get more access to growth-oriented asset classes such as equities.

Learn how we use hedging strategies to take advantage of changes in volatility and correlation to improve portfolio returns by reading our Return Shaping in Multi-Asset Portfolios whitepaper.