Easterly EAB Announces Hedged Equity and Risk Management Solutions for Institutional Investors

Easterly EAB Risk Solutions LLC, a new partnership combining the expertise of private asset management company Easterly and EAB Investment Group, announced today that it will provide risk mitigation solutions, including a Hedged Equity strategy, for institutional investors. Easterly EAB will leverage deep expertise in financial markets, derivatives, macro-economics, and risk positioning to help institutional investors manage their overall portfolio risk.

Easterly EAB’s approach combines defensive equity and derivatives strategies that can provide predictable dampening of volatility along with meaningful reduction of drawdown and unexpected correlation risks while enabling clients to continue participating in equity gains.

“Volatility has become a fact of life in the markets, and institutional investors that need to meet their commitments have to be able to manage market swings while staying invested to capture growth,” said Easterly EAB Managing Principal Darrell Crate. “While many investors de-risk by taking risk capital off the table, Easterly EAB’s 2^nd generation investment solutions systematically enable them to stay invested across their riskier exposures, retaining a level of equity exposure while dampening downside risk and equity correlation.”

Crate noted that multiple studies have underscored the importance of staying invested, since a relative handful of days account for a disproportionate share of equity market gains. Moreover, the markets are in drawdown or recovery from drawdown 74% of the time, making it difficult to time gains. Easterly EAB helps institutional investors avoid market timing while continuing to participate in the markets while managing downside risk.

Edward Boll, Easterly EAB’s Founding Partner, noted that during 2020 there were 106 days on which the S&P 500 gained or lost 1% or more of its value. “Volatility is the norm, more often than not. You can avoid volatility by reducing your exposure to the markets, or you can seek to manage it,” he said. “Our philosophy is to employ a systematic investment process to constantly manage risk and improve the risk-adjusted return profile of a portfolio.”

The Easterly EAB Hedged Equity Strategy uses long S&P 500 core equity positions together with systematic, option-based risk mitigation techniques. It is highly complementary to other risk management strategies and is a natural fit for portfolio de-risking efforts that seek to maintain the potential for upside capture.

The Hedged Equity Strategy is managed by a veteran team of investment professionals experienced in both equity investing and options including Arnim S. Holzer, Global Macro Strategist and Client Portfolio Manager at Easterly EAB and a member of its Investment Committee. “What makes our Hedged Equity Strategy unique is not simply the underlying long equity exposure and use of options to protect against volatility but also features that amplify the strategy’s protective qualities,” said Holzer. “These features include a focus on smaller market moves, which make up the lion’s share of downside moves, more frequent option resets and a non-linear defense that enables profits from hedging in a down market – refinements that provide added protection while maintaining the potential for gains.”

The unique features of the Easterly EAB Hedged Equity Strategy include:

• Less focus on large tail risks: The Hedged Equity Strategy targets protection on market moves of 1 to 2 standard deviations, which tend to represent the majority of market pullbacks. This offers more opportunities to potentially monetize and re-set the protection.
• Greater reset frequency: The put protection strategy targets durations of four to six weeks in normal markets. Thus, it is an active versus passive approach to hedging with the goal of keeping the downside protection consistently relevant. Because of the nature of the strategy’s duration, it creates an active market volatility adjustment feature that can modify protection dynamically to reflect current market volatility.
• Non-linear defense: The strategy defends non-linearly in market drawdowns, which is important in times of correlation breakdown. Using leverage during market declines enables The Hedged Equity Strategy to earn on the way down and allows clients to stay invested versus making panic decisions at market lows.

About Easterly EAB

With roots dating to 2011, Easterly EAB combines the experience and capabilities of Easterly, a private asset management holding company with affiliated managers that offer strategies across a variety of asset classes, with the expertise of EAB Investment Group, an SEC-registered investment company which specializes in hedged equity and derivatives strategies for RIAs as well as hedge funds, family offices and other institutional investors.

Easterly EAB provides diverse risk mitigation solutions for institutional investors. For more on Easterly EAB’s Hedged Equity Strategy as well as its custom solutions including volatility and hedging strategies; beta and correlation hedging; yield enhancement strategies; and the EAB Correlation Defense Index^TM, please visit https://www.easterlyeab.com.

Disclaimers

All information herein is from sources generally available to the public and believed to be reliable but have not been independently verified. No representation or warranty can be given with respect to the accuracy or completeness of the information, and is subject to updating, revision, and amendment. Easterly EAB Risk Solutions LLC (“Easterly EAB”) disclaims any and all liability relating to this information, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this information. Subscribers to any service provided by Easterly EAB should consult their own financial advisors, legal counsel, and accountants as to financial, tax, legal, and related matters concerning their subscription to Easterly EAB’s service. No part of this presentation constitutes financial, tax, or legal advice. Easterly EAB reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security.

This communication also contains forward-looking statements, which reflect the views of Easterly EAB. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements or other predications or assumptions are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. Easterly EAB and its affiliates do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.

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