The Intelligent Allocator: the cost of hedging - a certain price for an uncertain payoff
The Intelligent Allocator: the cost of hedging - a certain price for an uncertain payoff
Michael Strobaek
Global CIO Private Bank
Clément Dumur
Portfolio Manager
key takeaways.
- Equity hedging instruments offer ways to manage the impact of specific risks precisely, particularly to cushion against extreme market moves
- Buying hedges does not simply remove risk from a portfolio, and will lose an investor money over time
- Our analysis shows that over the last few decades, portfolio diversification has provided long term investors with hedging characteristics broadly comparable to those delivered by equity hedging options
- Hedge funds have broader and more flexible tools to manage risk, and we believe they are an important part of the strategic allocation of a well-diversified portfolio.
We look at scenarios in which the use of equity hedging instruments makes sense, and examine the behaviour of hedging versus portfolio diversification strategies…
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important information
This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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