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Risk & governance
Risk architecture, designed first.
Protecting capital and managing volatility are central to how the strategy is designed and run. Every position passes the same sequence of controls, and what the portfolio experiences feeds back into how large the next position can be.
Control chain
Four controls between a signal and the portfolio.
Sizing, limits and hedging are separate steps with separate jobs. Drawdown and volatility in the portfolio feed back to resize positions, and can trigger the hedge overlay.
Failure modes
What can go wrong, and what catches it.
Select a failure mode to see where in the chain it is caught.
| Failure mode | What happens | What catches it | Where |
|---|---|---|---|
| Volatility spike | Realised and implied volatility rise faster than positions adjust. | Volatility-based sizing reduces position size; de-risking protocols are tied to realised and implied volatility. | Volatility sizing |
| Concentration | Too much exposure builds in one instrument, sector or theme. | Hard limits on gross and net exposure at instrument, sector and portfolio level. | Exposure limits |
| Drawdown build-up | Losses accumulate across positions at the same time. | Continuous drawdown monitoring and scenario stress testing; hedge overlays engage and positions are resized. | Hedge overlay |
| Correlation breakdown | Diversification disappears as assets start moving together. | Cross-asset signals detect regime shifts early and change the regime classification. | Signal engine |
| Model decay | A signal stops working as market structure changes. | Robust data, version control, model validation and ongoing review of model behaviour under stress. | Signal engine |
| No clear opportunity | No regime offers a clear edge. | The flexibility to step back from risk rather than force exposure. | Portfolio |
Regime response
How exposure responds to each regime.
The same controls produce different portfolios in different conditions: compound when conditions align, defend when they do not.
Wait selectively
Signals are weak and correlations unstable. Thematic exposure holds; new systematic risk is limited.
Compound
Signals agree and volatility is contained. The core runs at its full budget inside volatility ceilings.
Trade smaller
Direction persists but swings widen. Positions are resized and trailing risk controls tighten.
Defend capital
Volatility spikes and correlations converge. Hedges engage and gross exposure falls.
Bars are qualitative and show direction of change between regimes. They are not exposure limits or targets.
Governance
Process discipline and alignment.
Operational discipline
- Clear separation between research, risk and execution processes.
- Emphasis on robust data, version control and model validation.
- Ongoing review of model performance and behaviour under stress.
Alignment & oversight
- Principals invest their own capital in the same strategy as investors.
- Regular reporting on risk, exposures and performance for investors.
- A governance framework designed for wholesale and institutional allocators.