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Striking the right balance: Portfolio construction through an asymmetry lens

June 2019 
By Jake Brown, CFA and Cat Dickinson from Wellington Management

A brief overview of the concept of asymmetry and a framework for applying asymmetry within a portfolio.

Jake Brown, CFA
Investment Director, Wellington Management
Cat Dickinson
Investment Analyst, Wellington Management

 

Since the global financial crisis, many investors have taken a greater interest in defensive-minded strategies that capture less than 100% of the market’s downside, even if that means sacrificing some market upside. While we agree with an approach that seeks to minimize downside, that is really only half of the story. Upside capture may be just as important. We would argue that the critical consideration is how one balances the trade-offs between upside and downside capture. To help frame this decision, we offer a lens through which investors can view portfolio construction and risk management: asymmetry.

In this paper, we offer a brief overview of the concept of asymmetry, a framework for applying asymmetry within a portfolio, and a few thoughts on selecting managers with the potential to consistently deliver a desired asymmetry profile. We end with some ideas from our multi-asset strategists on how different types of investors might apply this framework in their portfolios.



Important Risks: Investing involves risk, including the possible loss of principal. 

The views expressed herein are those of Wellington Management, are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of Hartford Funds or any other sub-adviser to our funds. They should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management or Hartford Funds.

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