Market Protection for Turbulent Times


June 2020

QMA’s latest paper, co-authored by Portfolio Manager Devang Gambhirwala and Managing Director Stephen Brundage, discusses the importance of including risk mitigation strategies (RMS) in your portfolio. Key takeaways of the paper include:

  • Investors have traditionally used asset allocation as a way to maximize risk-adjusted returns, but in the three most recent market crises: Tech Bubble burst, Global Financial Crisis and the COVID-19 crisis, most growth asset classes became highly correlated, reducing their diversification benefits.
  • Risk-mitigation strategies have therefore become an important element of asset allocation decisions.
  • Since its inception in 1992, QMA’s MPS has provided both upside participation in rising markets, and limited downside losses in falling markets.
  • The Strategy compares well with other RMS, including low volatility, options-based protection and hedged equity strategies commonly used for risk management, uncorrelated alpha and downside protection.
  • Using MPS as an equity or hedged equity substitute may provide higher risk-adjusted returns in a multi-asset portfolio.