What We Do

Mitigating

Understanding the nuances of various risks, costs, and liabilities is critical to being able to achieve the maximum benefits of an investment, while avoiding unintended or uncompensated risks and costs that often have a counter effect to overall objectives. Whether it's in the form of unintended currency exposures, rapid market decline or risks arising from economic factors, such as inflationary pressures, First Quadrant seeks to understand every aspect in order to minimize its impact. First Quadrant’s mitigating capabilities utilize various tools that are designed to guard against unwanted risks, costs and liabilities in the investor’s portfolio while simultaneously targeting value-added capital appreciation.
 

Currency management

Investors with international holdings must make decisions not only about their equity and fixed income exposures, but also about the currency exposures derived from those holdings. Either ignoring those exposures completely, fully hedging back to your base currency to avoid any currency risk, or even selecting a hedge ratio to minimize portfolio risk may not necessarily be optimal. With over 20 years of experience managing currencies, First Quadrant has a proven track record of delivering consistent risk-adjusted return for our clients. Using a dynamic approach to address the risk and return patterns of currencies, First Quadrant seeks to manage currency exposure in a disciplined way that can also enhance the profitability of your portfolio. We tailor various currency overlay and hedging solutions to meet the specific needs of our clients.

Tail-risk management

Investors have long appreciated the exposure to economic growth that equities provide. However, along with that comes the potential for strong, rapid declines as seen during market crises (often referred to as tail risk). At First Quadrant, we believe portfolio protection can be achieved in a number of ways. While the use of liquid alternatives can serve as ideal indirect hedges, First Quadrant also employs explicit hedging techniques through the use of options. First Quadrant’s tail-risk hedging capabilities seek to improve upon the simple put option protection-buying schemes by creating a costless combination of options that reduce possible declines by constraining possible gains.

Inflation protection

Two investors who both say they are concerned about inflation may actually be concerned about quite different issues. Inflation has a number of different effects, and it is important for each investor to identify the specific reason(s) for their concern. At First Quadrant, we have studied the various inflation concerns that investors may have, and have developed several metrics to evaluate the potential of different assets to address these different concerns. What we have found is that there is no single asset that can address both the short/medium-term and long-term concerns simultaneously. Accordingly, we employ such tools as balanced-risk commodities, enhanced commodities and TIPS to deliver real return solutions.

Tax management

For any investment held outside of a tax exempt or tax deferred plan, taxes matter a lot. The negative impact of taxes on portfolio performance has been documented and studied extensively by First Quadrant. An important outcome of these studies was the development of techniques that can be employed to reduce the impact of taxes on portfolio returns. First Quadrant has been at the forefront of using these techniques in our equity management process. Our tax-managed equities are designed to add value consistently on an after-tax basis by delivering pre-tax gains and by minimizing taxable income for our clients.


Past performance is no guarantee of future results. Potential for profits is accompanied by possibility of loss. Futures and options trading involves substantial risk of loss and shorting options may expose investors to unlimited risk.

Contact us to hear how we can help you manage and minimize your risks.