LongTail Alpha explores how combining multiple diversification strategies can improve downside protection in equity-heavy portfolios. Using 50 years of data, it challenges the idea that any single hedge is sufficient, showing that a blended approach across assets like gold, currencies, and options may produce more consistent outcomes, especially during equity drawdowns.
Diversifying Diversification
LongTail Alpha
Vineer Bhansali, Jeremie Holdom
Research
19 Pages
Key Takeaways
Multi Hedge Approach: Combining 6 diversifiers improved risk-adjusted outcomes over 50 years versus relying on any single hedge like gold or bonds alone.
Equity Drawdown Protection: Portfolios using S&P 500 80% strike puts reduced severe losses during major selloffs, with materially smaller drawdowns than equity-only allocations.
Diversification Stability Benefit: A portfolio of strategies delivered more consistent performance across decades, avoiding concentration risk seen when 1 hedge underperformed in specific market regimes.
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