Global Alpha.
Regional Insight.
Institutional Precision.
Active Risk Management & Hedging (2025)
Emit Capital uses active hedging to compress drawdowns, shorten recovery periods, and stabilise portfolio behaviour across market regimes — while retaining the majority of equity upside.
- Hedging is used for risk control, not to replace returns — enabling continuous equity exposure through volatility.
- Drawdowns were compressed and recovery requirements reduced, improving compounding efficiency.
- Risk-adjusted outcomes improved (Sharpe/Sortino) by reducing downside deviation and volatility drag.
- AUD vs USD dispersion highlights FX as a material driver of investor outcomes; active management stabilises the AUD path.
Why We Actively Hedge
The objective is to control the shape of outcomes: protect capital, stabilise volatility regimes, and preserve decision-making flexibility — while retaining upside participation.
Capital Protection
Limiting drawdowns materially improves long-term compounding and reduces the probability of forced de-risking.
Volatility Control
Hedging dampens left-tail outcomes and volatility drag while remaining invested in structural equity winners.
Decision Flexibility
Protection preserves optionality during stress, enabling opportunistic re-risking when others are constrained.
Allocator View: Return vs Max Drawdown
This chart focuses on two allocator priorities: the return achieved and the maximum drawdown incurred along the way.
Max Drawdown vs Return (Hedged, by portfolio)
North American Portfolio
High-growth exposure to AI, electrification, and infrastructure, supported by an active hedging overlay designed to compress drawdowns while retaining upside participation.
Key Metrics
Hedged vs Unhedged
| Metric | Hedged | Unhedged |
|---|---|---|
| Total Return (annual) | — | — |
| Hedge Cost / Drag (annual) | — | |
| Annualised Volatility | — | — |
| Max Drawdown | — | — |
VAMI (Growth of $1)
Illustrates the cumulative growth of $1 invested over time, highlighting drawdowns, recoveries, and compounding behaviour.
AI-Tech Portfolio
High-beta exposure to the AI infrastructure super-cycle. Active hedging aims to reduce volatility drag and preserve decision flexibility through regime shifts.
Key Metrics
Hedged vs Unhedged
| Metric | Hedged | Unhedged |
|---|---|---|
| Total Return (annual) | — | — |
| Hedge Cost / Drag (annual) | — | |
| Annualised Volatility | — | — |
| Max Drawdown | — | — |
VAMI (Growth of $1)
Illustrates the cumulative growth of $1 invested over time, highlighting drawdowns, recoveries, and compounding behaviour.
EU/UK Portfolio
Lower-beta infrastructure and electrification exposure across Europe and the UK, supported by an options overlay to manage drawdowns and volatility regimes.
Key Metrics
Hedged vs Unhedged
| Metric | Hedged | Unhedged |
|---|---|---|
| Total Return (annual) | — | — |
| Hedge Cost / Drag (annual) | — | |
| Annualised Volatility | — | — |
| Max Drawdown | — | — |
VAMI (Growth of $1)
Illustrates the cumulative growth of $1 invested over time, highlighting drawdowns, recoveries, and compounding behaviour.
Asia-Pac/Japan Portfolio
Selective Asia-Pacific exposure with active hedging to stabilise outcomes through policy and macro-driven volatility.
Key Metrics
Hedged vs Unhedged
| Metric | Hedged | Unhedged |
|---|---|---|
| Total Return (annual) | — | — |
| Hedge Cost / Drag (annual) | — | |
| Annualised Volatility | — | — |
| Max Drawdown | — | — |
VAMI (Growth of $1)
Illustrates the cumulative growth of $1 invested over time, highlighting drawdowns, recoveries, and compounding behaviour.
Recovery
Calendar Year 2025 (AUD). Recovery time measures the number of months required for a portfolio to regain its prior peak NAV following a drawdown (month-end basis).
Recovery Time (Months): Hedged vs Unhedged
| Portfolio | Hedged (with options) | Unhedged (equities only) |
|---|---|---|
| North America | 2 months | 3 months |
| AI-Tech | 1 month (early) Unrecovered (late-year) | Unrecovered |
| EU / UK | 1 month | 1 month |
| Asia-Pac / Japan | Unrecovered | Unrecovered |
Key Observations
North America: Hedging materially reduced recovery time, allowing capital to redeploy faster after Q1 volatility.
AI-Tech: Early-year drawdowns recovered quickly, but late-year momentum reversals remain unrecovered with or without hedging — reflecting regime risk rather than hedge failure.
EU/UK: Hedging primarily reduced drawdown depth, with recovery speed broadly similar in a lower-beta market.
Asia-Pac/Japan: Both hedged and unhedged portfolios remain below prior peaks; hedging served to stabilise outcomes, not accelerate recovery.
Why Recovery Time Matters
Volatility is a statistic. Recovery time is behaviour, liquidity, and decision-making risk.
Emit Capital’s hedging framework is designed to:
- Compress recovery periods where possible
- Preserve capital flexibility through volatility
- Reduce the probability of prolonged drawdown states
Hedge Outcome
Across all portfolios, active hedging compressed drawdowns and stabilised portfolio behaviour — supporting repeatable compounding and decision flexibility through volatility regimes.