The Best of Strategies for the Worst of Times: Can Portfolios be Crisis Proofed?

Man Group

Campbell Harvey

Research

26 Pages

Man Group examines whether portfolios can be structured to withstand major crises by analyzing historical drawdowns and common hedging strategies. The paper highlights that the most effective protection often comes with meaningful cost, while traditional diversifiers like bonds may fail when needed most, challenging conventional portfolio construction.

Key Takeaways

Put Protection Tradeoff: S&P 500 put strategies reduced drawdowns by over 50% in crises but imposed a persistent drag of roughly 2–4% annually on long-term returns.
Bond Correlation Shift: Stock-bond correlations turned negative only after 2000, meaning over 100 years of data shows bonds were not consistently reliable crisis hedges.
Multi Strategy Resilience: Combining momentum and quality factors improved crisis outcomes, with some strategies delivering positive returns during equity drawdowns exceeding 30%.
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