Hedgeye

Hedgeye Risk Management

Hedgeye Risk Management employs a strategy of absolute return investing based on Daily Risk Management and real-time analytics.

The benefit of this conservative investment approach is absolute capital appreciation in up or down markets, and preservation of capital even in turbulent times. Our complementary, but independent platform elements include:

Daily Cash Allocation: We update our Cash vs. Invested Allocation each morning on our Morning Macro call. This expresses our view of risk in the market. We will increase our allocation to cash (uninvested) as risk in the markets increases; and decrease our cash allocation as reward moves towards outstripping risk.  As you can see below, we have varied our cash allocation inversely to the probability of market moves.

Daily Asset Allocation: Along with our daily cash allocation, our Daily Asset Allocation expresses a risk-managed relative exposure to countries, currencies, and commodities, expressed through ETFs (exchange-traded funds). Our Daily Asset Allocation signals our approach to hedging risks by distributing investment amongst differently correlated asset classes.

Daily Risk Analysis:  our Early Look and U.S. Strategy notes outline the risk/reward setup for the broader markets as well as for each of the nine sectors of the S&P 500, before each market day. The Early Look calls out not only Macro and secular risk factors for the upcoming market day, for specific sectors and segments, and for specific companies, but also analyzes outlooks over the TRADE, TREND, and TAIL durations for each sector.
 

Real-time Analysis: In addition to the daily risk management tools, our intraday Macro and Sector analysis tracks opportunity and risks on specific sectors, asset classes and equities/ETFs, in real time.

Real-Time Portfolio:  Our real-time portfolio of equities and ETFs expresses our real-time view, throughout the market day, of specific opportunities and risks around specific investment ideas. Broadly, the long positions in our portfolio signal opportunities and short positions signal risks. Our real time moves to “sell” (long) or “short” a position signals an increased risk for that position; conversely, moves to “buy” (long) or “cover” (short) signals an opportunity in that position.

Macro and Price Are Fundamental: Finally, we believe that always including a Macro perspective, with a healthy respect for Mr. Market’s prices, is now required in all investment analysis. Investors have learned over the last cycle (a massive crash followed by a massive surge in market values) that no fundamental analysis performed on a potential investment, without robust analysis of Macro and price factors, is sound.