LGT Dynamic Protection UCITS

The LGT Dynamic Protection fund targets cost-efficient equity drawdown mitigation through a systematic approach that dynamically invests across the most liquid exchange-trade futures (volatility, equities, commodities, bonds and currencies) while avoiding the high costs related to options. The fund aims to exploit cause-effect linkages during periods of market stress (e.g. flight to quality) or rising implied volatility through a multi-asset approach, a stance that is required to reduce the risk of missing out asset specific risk-off moves. The portfolio consists of a diversified set of eight sub-strategies which are clustered into two categories: safe heaven strategies (government bonds hedge, money market hedge, safe-haven currencies hedge, commodities hedge and gold hedge) and long volatility strategies (VIX hedge, equity contrarian short bias and tactical short). Each sub-strategy receives an equal risk budget. However its risk usage is dependent on the underlying signal strength, with the strategy allocation process following a dynamic framework that is tied to equity market volatility. As a result, the strategy acts akin to a pressure valve in the portfolio that switches exposures to a more defensive asset mix during turbulent periods (by overweighting long vol biased strategies) and then back to a less defensive mix during calm periods. The target portfolio is computed overnight and adjusted daily.