Use Case: Consensus Protection Portfolio, 2022 Update

Last year we published a white paper “Building a consensus protection portfolio”. In this paper, we constructed a hypothetical consensus protection portfolio using Premialab Pure Factors® and simple options hedging overlay strategies. Pure Factors, designed to track consensus performance across a wide range of indexed systematic strategies, provide the breadth, uniformity, and realism that can help investors explore new and existing sources of diversifying return, perform more detailed factor attribution and construct more resilient portfolios.

As a recap, within the consensus protection portfolio we selected 5 strategy classes to provide robust downside protection: diversified commodity risk premia, macro trend, short term rates trend, intraday equity momentum, implied volatility and realized volatility. At the time we showed how the portfolio resisted during historical stress test period.

With the first half of year behind us, we have seen a market environment unlike any other in the past decade. With the S&P 500 down -14%, the technology heavy Nasdaq down -20%, and traditional diversifiers like the bonds down -10% (US Bloomberg Aggregate Index) there hasn’t been many places for an investor to hide.

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