Developing an Optimal Method for Multi-asset Portfolio's Downside Protection

Abstract

This qualitative research based on phenomenology might prove useful in writing the Investment Policy for Institutional Investors in nascent capital markets. The study provides insight into how institutional investors prepare for imminent occurrence of extreme market conditions and the measures they adopt to mitigate the consequences of such extreme market conditions on their investment portfolios. The responses were collected over nearly one and a half years, from March 2013 to September 2014, using various forums held in different cities of the world. The study adopted the methodological triangulation approach to reinforce the findings and build credibility whilst enhancing the usefulness of the findings. This was done by interacting with different groups of respondents and different forums to confirm the findings. All of the respondents were senior decision makers from a wide variety of Institutional Investment entities. From the detailed analysis of the responses emerged concise but dominant topics and strategies. Some of these include risk-based diversification, volatility regimes and risk indicators, low volatility anomalies, rebalancing, going long volatility, longer horizon, rule-based decision making and corporate governance, counter-cyclicality, benchmark agnostic strategies and valuation fundamentals.