Approach to Downside Risk Management for Multi-Asset Portfolios

This document is a technical report that outlines an approach to managing downside risks for multi-asset portfolios, particularly in the context of recent market volatility. It discusses the impact of geopolitical events, such as the Russia-Ukraine conflict, on global markets and emphasizes the need for effective risk management strategies. The authors detail their process for constructing a multi-asset solution, which includes dynamic strategic asset allocation and tactical asset allocation based on market conditions. They introduce an active risk overlay program designed to manage equity risk through a combination of quantitative and qualitative assessments. The report provides examples of how this framework has been applied during significant market events, including the Covid-19 pandemic and the aftermath of the 2024 U.S. presidential election. The authors conclude that a proactive approach to risk management is essential for preserving income and achieving investment objectives in volatile environments.