Jack Hansen, Chief Investment Officer from Parametric in Minneapolis lead a panel discussion titled Implementing Volatility Strategies within Institutional Portfolios to close out the first day of CBOE’s Risk Management Conference.  The panel consisted of

  • Mohamed Ellouze, Senior Multi-Asset Strategist, Universities Superannuation Scheme (USS)
  • Simon Guyard, Portfolio Manager, Air Canada
  • John St. Hill, Deputy CIO, NEST

The panel discussion jumped from topic to topic and time ran out before all audience questions could be addressed.  It was noted there is a distinct difference between selling volatility and selling volatility that would be purchased to cover tail risk.  The risk versus reward for the tail risk sale may not warrant a systematic approach on that end of the curve.   The panelists were asked how they depict worst case scenarios for short volatility strategies.  Two different methods were discussed, showing the result of the impact on performance that would have occurred in 1987 or a quick move in VIX to 80.  When asked about how the market has changed with respect to attitudes about volatility as an asset class it was noted that the free education available on how to implement different short and long volatility strategies has increased tremendously over the past couple of years.  Finally, when asked about a benchmark the panelists seemed to all favor a risk adjusted return versus traditional asset classes as a method of measuring performance.