How can I protect my portfolio from the volatility risk and sudden market uncertainty?
Absolute return strategies are becoming a must
You should get used to an environment with higher volatility, leading you to seek out new ways to diversify your portfolio, in order both to generate returns and to hedge the risks related to traditional assets such as equities and bonds.
Alternative return strategies are an attractive alternative in this market environment. Not only do they help reduce the risk profile of a diversified portfolio, they also provide an additional source of return. Many of them tap into the renewed volatility that often comes with greater dispersion and thus more investment opportunities in alternatively managed absolute performance investment solutions.
Opt for solutions with a pre-defined risk budget
You have several ways to protect your portfolio against sudden market uncertainties. However, it is not an easy job to dynamically manage your exposure to risky assets in order to limit the fluctuations in your portfolio’s value.
Specific multi-asset solutions with a pre-defined risk budget are a good alternative. These solutions have both a return and a volatility target. Experienced fund managers can invest in a wide range of asset classes in function of Candriam’s market outlook, and actively use derivatives in order to control the portfolio’s volatility and limit the downside risks.