The Active Hedge Overlay Process

The Active Hedge Overlay (Active Hedge) process starts with a thorough understanding of the client’s investment objectives.  We assess your investment goals, available resources, desired rates of return, and risk tolerances.

Since this trend following solution helps to protect and enhance an existing portfolio, we then examine that underlying portfolio in light of the information obtained in our investment objective review, above.  The most important element of this portfolio review is to understand the amount of portfolio turnover, the types of holdings and the volatility of return from this portfolio (beta).

We then develop a customized Active Hedge solution that will allow you to reach your long-term goals and objectives combining both your current portfolio with our Active Hedge solution.  Since this is a customized solution, the Active Hedge can be designed to attempt to smooth returns and portfolio volatility without regards for the dollars that would be required to effectively cover the portfolio.  Alternatively, it can be designed to minimize the Active Hedge size without regard for portfolio volatility, or anything in between that meets your objectives.

Finally, the process requires that we communicate regularly with you on any changes to the underlying portfolio, your objectives or the beta relationship between the portfolios or the beta benchmark.