Smart tail risk management in the current era of 60/40 dysfunction.
From the #TailRiskDesk: The Rotation of Protection “Do I buy Treasuries when the government owes $38 trillion, corporate bonds with spreads at 20-year lows, stocks trading on a 40x CAPE, or gold that’s just gone vertical? Tricky.” — Michael Hartnett, Bank of America (MarketWatch) This sums it up well. The easy hedges have run out of symmetry, for example gold calls: once a clear tail-risk expression, have reached that point. 1. From Gold to Equities (CAT I) The S&P 500’s recent gains tell the story clearly. More than half of the move since 2023 came from multiple expansion; with the rest from earnings growth. When valuation carries the index, convexity becomes cheap. We have increased CAT I equity hedges, positioning for a near-term pullback. 2. Staying Firm in Credit BDC weakness continues to deepen. It may still look contained, but if liquidity tightens, it will spread to high-yield and investment grade. We are maintaining our credit hedges until stress in private credit stops being ignored. 3. Stepping Back from Gold With price making new highs and volatility climbing, the tail’s payoff is no longer asymmetric. We have lightened most of our positioning in gold calls for now, waiting for a cleaner entry rather than chasing momentum. Not every hedge works forever. Sometimes protection shifts from one form to another, this month marks that rotation. We keep convexity where it still has room to work. For family offices seeking risk management via tail protection without the complexity, our Tail Risk Fund provides ready-made, diversified hedging across equities, credit, rates, and FX for simple access, managed execution, and testable size. We would love to hear from you! Reach out through our website link in the comments below or message us directly here on LinkedIn! 👇 #TailRisk #riskmanagement #portfolioprotection #marketstrategy #volatility #macro #alternativeinvestments #capitalrreservation #hedging
