Alternative
Strategies
RISK RESPONDERS STRATEGY
The Risk Responders Strategy is a cash-efficient, fully systematic combination of Dynamic Convexity (long equity volatility), Core Markets Trend, and Alternative Markets Trend. The strategy combines these strategies into one integrated vehicle and deploys additional leverage to each sleeve, with the intention of providing robust risk mitigation in the face of both market crises (Dynamic Convexity), as well as during prolonged risk asset declines or macro asset regime shifts (Trend).
Risk shifts dynamically between long volatility and trend exposures over time, such that the portfolio risk tends to be primarily driven either by long volatility or trend themes, based on how the model views the comparative attractiveness of the underlying strategies. This combination of risk mitigating exposures is expected to deliver a strong risk-adjusted return in most environments, particularly during major equity market crises. Profit-taking is embedded into the model, relieving investors of the pressure to time their exit from the strategy, allowing it to be held through the cycle as a source of positive portfolio convexity.
SYSTEMATIC TREND
The pure trend following strategy seeks to exploit medium to long-term trends frequently observed in the world’s most liquid equity index, fixed income, foreign exchange, and commodity markets to generate positive returns. It is built through a combination of deep quantitative research and discretionary macro trading expertise, and is sensibly constructed to maximize alpha instead of capacity, using a limited number of parameters to improve robustness. We embed common-sense risk management logic into our unique algorithm, combining the attractive attributes of medium to longer-term signals with the nimbleness to get into or out of positions quickly if needed.
SYSTEMATIC ALTERNATIVE MARKETS TREND
The strategy applies a unique trend model to esoteric global markets that tend to exhibit more idosyncratic return behavior. These markets include developed and emerging market interest rate swaps, emerging market foreign exchange, credit indexes, equity market sectors, European power and emissions markets, etc. One River has traded these global macro markets for years and has developed the systems to price, trade, and quantify/manage the risks. The strategy embeds common-sense risk management logic into the unique algorithm, combining the attractive attributes of medium to longer-term signals with the nimbleness to get into or out of positions quickly if needed.
VOLATILITY RELATIVE VALUE
The discretionary market-neutral strategy takes long/short positions in volatility markets across global equity index, foreign exchange, interest rate and commodity volatility markets. The strategy can generate positive returns in both bullish and bearish equity environments. The team applies a specialized quantitative volatility infrastructure to support our fundamental portfolio managers using inputs such as valuation, microstructure data, structured product data, and dealer hedging activity. Macro awareness is integral to the investment process, creating a more complete understanding of the market environment rather than relying purely on traditional statistical metrics. Our expertise in finding ways to be long volatility while minimizing carry is a distinct advantage when constructing a Vol RV book that can generate strong, differentiated returns and is built to withstand market dislocations.
DYNAMIC CONVEXITY
This highly convex systematic strategy trades volatility futures, volatility options, and options on major global equity indexes from the long-side only. It codifies several discrete volatility trading strategies developed and honed through years of trading these markets on a discretionary basis and combines them into a fully systematic portfolio. The strategy capitalizes on inefficiencies in volatility markets to maximize upside capture in periods of stress while minimizing bleed in times of relative calm. Risk is adjusted automatically using a range of signals and measures of value. Profit-taking is embedded into the algorithm, relieving investors of the pressure to time their exit from the strategy, allowing it to be held through the cycle as a source of positive portfolio convexity.
DISPERSION ALPHA
The Dispersion Alpha strategy seeks to generate alpha from dislocations between index volatility and its constituents' volatility. The strategy implements Dispersion trading across four key trade types: Classic Dispersion, Value-Oriented Dispersion, Flow-Driven and Thematic Dispersion, and Active Dispersion. The strategy is designed tocapture the correlation risk premium and generate aditional alpha through inefficiencies in dispersion trading, while maintaining neutrality to equity markets and a low correlation to other major market betas and hedge fund betas.
For institutional clients who require a customized solution, One River can deliver combinations or modified expressions of our investment strategies in a fund-of-one, managed account, swap or UCITS compliant structure. We partner with such bespoke clients in one of three ways; (1) they present us with an investment need to tilt their portfolio and/or hedge a specific risk and we then create a combination of our strategies to achieve that objective, (2) they ask us to build a holistic, stand-alone portfolio of our strategies that is designed to fit well within their larger alternatives portfolio, and (3) they turn to us for solutions that materially reduce the expense ratio and increase the capital efficiency of their existing portfolio while maintaining equivalent market exposures.
Our alternative strategies leverage the full capabilities of our investment team’s experience over multiple decades running both discretionary and systematic strategies. Our approach is distinct in the industry, leveraging macro awareness, data-driven processes, and market-tested risk management.
We offer six strategies across three categories: Volatility, Trend, and Inflation. Within Volatility, we operate two Long Volatility strategies, and one alpha-seeking Volatility Relative Value strategy. Within Trend we offer two fully systematic strategies, one of which is focused on major markets, and another on alternative markets. Our forthcoming Inflation strategy seeks to benefit from an inflationary backdrop and higher potential inflation volatility.
THE ABSURDITY OF CERTAINTY: The Total Portfolio Approach to Sizing Long Volatility
We explore the important portfolio allocation factors when determining the ppropriate weight to convexity, and how impactful implementation style is in determining the optimal weight to maximize returns.