The Seeking Alpha podcast “SA For FAs” delivers information and analysis that helps financial advisors throughout their day. Hosted by Seeking Alpha senior editor and producer Gil Weinreich, the podcast addresses issues of current interest to financial advisors and active investors, such as macro analysis of current issues affecting markets, retirement planning, and asset allocation strategy.
In this April 2020 episode "The Asset Allocator: Magnifying Volatility," Harbor Crest Wealth Advisors founder and CEO Mike Hennessy spoke with Seeking Alpha's Gil Weinreich about a trade that lost nearly two decades of performance in March 2020: variance swaps.
A variance swap is available only to institutional investors such as asset managers because it requires advanced modeling capabilities. A variance swap is a bet on expected volatility, and March volatility was so great that this trade wiped out a couple of hedge funds.
This podcast suggests that clients holding alternative investments or structured notes are likely already exposed to complex derivative strategies, and that advisors should therefore know about the workings of trades like variance swaps that can magnify an already volatile environment.
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