Risk Management Strategies

The difficult investment environment over the past several years has created investor concern about the volatility level of their equity portfolio. Pavilion can develop a variety of risk management strategies on a fully customized basis for clients. Our team of researchers draws upon quantitative analysis and academic research to ensure client portfolios are completely protected.

Some examples of risk management strategies that can be implemented by Pavilion include:

  • Constant volatility overlay: Based on award-winning proprietary research, this strategy allows investors to set a target volatility level for their equity portfolio based on their risk preferences. The strategy seeks to maintain that target level by moderating the portfolio’s exposure to the market, conditional on the prevailing level of market volatility. A pension plan, for instance, can reduce the possibility that equity market fluctuations will vary from actuarial assumptions, which in turn makes funding level volatility more predictable.
  • Low volatility strategies: Institutional investors have been looking at different methods to incorporate risk into their portfolios and some research has shown that stocks with lower volatility have generated higher returns over certain periods. Certain clients have specific portfolio requirements in this regard, and Pavilion is able to meet these needs by implementing a solution using quantitative methods and portfolio tools that can deliver the client’s expected outcomes within specific variability ranges.