Capital Preservation in Volatile Markets
Capital Preservation in Volatile Markets
Market volatility is not an anomaly — it is the natural state of capital markets. The question is never whether turbulence will arrive, but whether your portfolio is structured to endure it. At Aurelius, we view periods of elevated uncertainty not as crises to fear, but as environments that reward disciplined positioning.
Defensive Positioning
When uncertainty intensifies, our approach shifts toward four core defensive strategies:
- Treasury allocation rebalancing — Increasing exposure to short-duration sovereign debt provides both capital protection and optionality. These positions serve as dry powder for opportunistic redeployment when valuations correct.
- Quality tilt in equities — We rotate toward companies with strong balance sheets, consistent free cash flow, and pricing power. These businesses tend to compress less during drawdowns and recover more swiftly.
- Volatility harvesting — Through carefully structured options strategies, elevated implied volatility becomes a source of premium income rather than a threat. We sell volatility when others are buying insurance.
- Liquidity reserves — Maintaining a meaningful cash and cash-equivalent buffer ensures we are never forced sellers at distressed prices. Liquidity is the ultimate strategic asset in dislocated markets.
The Aurelius Framework
Our systematic risk assessment process continuously evaluates macro indicators, credit spreads, and cross-asset correlation regimes. When our proprietary risk composite breaches defined thresholds, portfolio tilts are executed methodically — not reactively.
| Approach | Equity Allocation | Fixed Income | Alternatives | Cash |
|---|---|---|---|---|
| Conservative | 30% | 40% | 15% | 15% |
| Moderate | 50% | 30% | 15% | 5% |
| Aggressive | 70% | 15% | 12% | 3% |
The distinction between preservation and growth is not a binary choice. It is a calibration — one that must be revisited as conditions evolve. At Aurelius, we believe that protecting capital today is the surest path to compounding it across generations.