U.S. Defensive Equity

The Defensive Equity (DE) strategy seeks to achieve attractive risk-adjusted returns relative to the S&P 500® Index across all market environments. The strategy follows a different path to low volatility equity - one that structurally reduces equity market risk, while adding a relatively uncorrelated risk premium to enhance returns.  It is expected that this tradeoff over the long term will lead to a smoother ride along the way and more predictable outcomes. 

DE portfolios are constructed and managed to capitalize on the financial "volatility risk premium" that has historically been embedded in index option prices. DE creates implicit downside protection through a core asset allocation that is split between equity and U.S. Treasury Bills.  Equity index call and put options are then sold against these core positions. All short option positions are fully-covered in order to eliminate any potential leverage. Clients utilize DE within their asset allocations in several ways including:  to complement higher risk equity strategies, as a replacement for traditional equity hedges, to provide an additional component within the marketable alternatives bucket, and as a potential “alpha source” that can be transported to other assets when managed on an “options only overlay” basis.