Complementary Hedge, Macro & Systematic Mandates
Complementary Mandates – Managing Risk Beyond the Equity Core
Sunnov’s hedge, macro and systematic strategies are designed to sit alongside core equity allocations, not to replace them. They provide additional tools for managing risk, diversifying return drivers and expressing convictions about macroeconomic or structural themes within clearly defined limits.
The emphasis is on clarity of role and disciplined implementation. Each complementary mandate is built to address a specific need – such as drawdown mitigation, diversification or tactical expression of views – using liquid instruments and rule‑based processes wherever possible.
Why use complementary mandates at all
Traditional equity and bond portfolios can leave investors exposed to concentrated risk factors and episodes of market stress in which many assets move together. Complementary mandates offer additional levers that can be pulled when appropriate, helping to smooth the path of returns and reduce reliance on a single source of risk.
Within a broader allocation, these strategies can provide either a defensive buffer during adverse conditions or a way to access differentiated opportunities that are difficult to capture through long-only holdings alone. Their inclusion is always framed by the investor’s objectives, tolerance for complexity and governance capacity.
The building blocks: hedge, macro and systematic approaches
Sunnov’s complementary platform draws on several families of techniques, combined in proportions that reflect the investor’s brief.
- Long/short equity: selective short positions and hedges designed to offset specific risks within the equity book, or to express relative-value views between companies or sectors.
- Global macro: use of rates, currencies, indices and related instruments to position for macroeconomic developments or to manage portfolio-level sensitivities.
- Systematic overlays: rules-based strategies that respond to trends, mean-reversion signals or factor dynamics across liquid markets, implemented with pre-defined risk constraints.
Portfolios typically employ listed derivatives and other liquid instruments, allowing positions to be scaled, adjusted or closed as conditions evolve.
Controlling leverage, complexity and interaction with the core
Complementary mandates introduce additional dimensions of risk, including leverage, basis risk and model uncertainty. Sunnov therefore treats risk architecture as integral to design, not an afterthought.
- Clear caps on gross and net exposures, and on the contribution of each mandate to overall portfolio risk.
- Scenario and stress testing across combined core-plus-overlay portfolios, rather than assessing strategies in isolation.
- Transparency on instruments used, liquidity assumptions and margining requirements, so that investors understand operational as well as market risks.
These controls are documented and reviewed regularly with clients, aligning complementary activity with existing governance frameworks.
Investors suited to hedge, macro and systematic approaches
Complementary mandates are usually appropriate only for investors with sufficient scale and governance capacity to understand and oversee them. Typical users include:
- Institutions seeking to reduce reliance on directional equity risk whilst maintaining public-markets exposure.
- Foundations and endowments that wish to protect spending programmes against severe market drawdowns.
- Family offices and other sophisticated investors comfortable with derivatives and systematic processes, looking to refine the risk profile of existing portfolios.
Consider whether complementary mandates fit your objectives
Sunnov works with investors to determine where, and to what extent, hedge, macro and systematic approaches may add value alongside core equity exposure. Structures can range from simple overlays to more extensive multi-strategy allocations.