Should Your Portfolio Protection Work Fast or Slow? 

AQR

Research

16 Pages

AQR Capital Management compares protection that pays off quickly in crashes versus defenses built for long, grinding drawdowns. They argue many popular hedges are designed for speed, but can struggle when losses unfold slowly across assets. Trend following is framed as a more durable diversifier when traditional stock and bond balance disappoints.

Source: AQR

Key Takeaways

Speed versus stamina: Fast hedges can shine briefly, but may fade during extended declines.
Hedge fit matters: Protection choices should match the drawdown pattern investors actually fear.
Trend diversifier: Trend approaches can help when diversification breaks and pain lasts longer.
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