NEW YORK–(BUSINESS WIRE)–Harvest Volatility Management, (“Harvest”), a leader in options-based yield enhancement strategies, risk reduction, alternative beta and absolute return investment strategies for institutional, family office and high-net-worth investors, has been closely monitoring the market events of the past few weeks, with a particular emphasis on the impact that the potential reemergence of inflation may have on both the fixed income and equity components of investors’ portfolios.
As the recent spike in treasury yields and resulting slump in equities has made clear, there is a growing consensus around the return of inflation that has left both bond and equity investors nursing losses and uncertain about what comes next. Are rising yields a sign of stronger growth that will continue to push markets higher or a signal of growing inflationary pressure? Either way, it seems that a primarily “risk on” approach may no longer be the proper answer for investors.
According to Harvest Chief Operating Officer, Garrett Paolella, the low-rate environment over the last fifteen years since the Great Financial Crisis has forced investors to make the often difficult choice between income and yield. Investors starved for yield could either seek strategies that carry a relatively riskier profile, while those seeking income invested in solutions with less risky profiles, but which have significantly less yield generating potential.
“In our current investment climate, with the Fed staying consistent in their commitment to keeping rates down for the foreseeable future, clients and advisors are challenged to find income replacement investments that can provide current income without taking outsized risks,” said Paolella. “At the same time, with growing expectations for at least a modicum of inflation, which Chairman Powell alluded to in comments just this week, and a weakening dollar, the potential for a meaningful loss of purchasing power over time may become a real issue for investors seeking steady income.”
Continued Paolella, “This need to marry risk and yield has provided the impetus for the development of new strategies that utilize options to systematically generate income while reducing volatility and mitigating downside risk.”
At Harvest, the use of options to deliver innovative solutions that directly address investor needs is part of the firm’s DNA. With this distinct new approach to income generation that uses options to produce consistent cash flow while mitigating the potential for downside risk, investors and advisors now have an investment solution that offers a better overall risk/reward tradeoff between yield and volatility.
Paolella and his colleagues write regularly about their views on the markets, portfolio construction, and more, and can be followed here: https://hvm.com/research/.
By: Garrett Paolella
Chief Operating Officer
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