On this version of ETMarkets PMS Talk, Rishabh Nahar, Associate and Fund Supervisor at Qode Advisors, explains how a better allocation to gold and a dynamically managed spinoff hedge helped cushion draw back danger and generate alpha.
He additionally shares insights into the technique’s asset allocation framework, risk-adjusted return focus, and why an “all climate” method could also be notably related in at the moment’s unsure macro atmosphere. Edited Excerpts –
Q) QAW delivered almost 7% return in January 2026 versus a 3% decline in the Nifty50. What led to the outperformance?
A) The outperformance in January was primarily pushed by two elements: our increased allocation to gold and the efficient deployment of dynamic spinoff hedges.
Gold acted as a robust diversifier in the course of the fairness drawdown, whereas our hedging framework protected the fairness portion of the portfolio throughout market weak point.
The mix of asset diversification and tactical hedging enabled QAW to ship constructive returns regardless of a difficult fairness atmosphere.
Q) QAW positions itself as a diversified, low-volatility technique with a spinoff hedge. How is the hedge structured and how dynamic is it throughout cycles?
A) The spinoff hedge is designed to guard the fairness part of the portfolio throughout medium- to long-term downtrends. It isn’t static – it adjusts dynamically based mostly on market path and pattern indicators.
When markets exhibit sustained weak point, hedges are activated to scale back draw back danger. Conversely, throughout robust uptrends, hedges are scaled down or eliminated to keep away from pointless price drag.
This dynamic construction permits us to stability safety and participation effectively throughout market cycles.
Q) How do you identify asset allocation between fairness, gold, and money?
A) The asset allocation framework is the consequence of rigorous testing and correlation evaluation throughout asset lessons. Gold and equities traditionally exhibit complementary conduct, particularly during times of stress.
Inside equities, we mix momentum and low-volatility methods, which themselves have a tendency to enhance one another throughout market regimes.
Whereas the core allocation is strategic and not regularly altered, we conduct common portfolio critiques and might make measured changes based mostly on prevailing market situations and macro positioning.
Q) Since inception in November 2024, what has been the most important contributor to alpha – asset allocation, inventory choice, or derivatives?
A) The biggest contributor to alpha thus far has been asset allocation – notably our increased allocation to gold – together with the well timed and efficient execution of our spinoff hedges.
The interaction between diversified asset allocation and well-calibrated hedging has been instrumental in producing extra returns.
Q) The Sharpe ratio stands at 1.59 versus 0.03 for the benchmark. How sustainable is that this risk-adjusted outperformance?
A) The portfolio is particularly designed to optimize risk-adjusted returns somewhat than maximize uncooked returns. A better Sharpe ratio is a structural goal of the technique.
By combining uncorrelated property and disciplined hedging, we intention to ship steady and constant efficiency throughout market cycles. Whereas short-term metrics can fluctuate, the design philosophy of the portfolio helps sustainable risk-adjusted outperformance over the long run.
Q) With commonplace deviation barely increased than the Nifty (13.42% vs 12.95%), how do you outline “low volatility” in this context?
A) Whereas our commonplace deviation has been akin to the Nifty over the previous 12 months and since inception, an additionally significant measure is drawdown.
QAW has skilled considerably decrease most drawdowns in comparison with the Nifty 50 throughout the identical interval. Over longer time frames, we anticipate volatility to reasonable additional.
The technique’s goal will not be solely to attenuate short-term fluctuations, but additionally to scale back draw back severity and enhance return consistency over time.
Q) How actively do you rebalance between fairness and gold based mostly on macro indicators?
A) The portfolio undergoes a structured rebalance yearly to keep up strategic alignment. Nevertheless, we constantly monitor macroeconomic indicators and market situations.
If warranted, we might make measured tactical changes in the course of the 12 months, although modifications are incremental somewhat than aggressive. The framework prioritizes stability whereas remaining conscious of evolving macro tendencies.
Q) Within the present macro atmosphere, what dangers justify an “all climate” method?
A) The present atmosphere is characterised by geopolitical uncertainty, inflationary pressures, shifting rate of interest cycles, and periodic fairness volatility.
An “All Climate” method is designed to navigate such uncertainties with out requiring exact market timing.
Whereas the technique might not seize the total upside throughout robust fairness bull runs as a result of diversification into gold and hedges, it goals to ship smoother and extra constant returns throughout cycles – which is especially precious in unsure macro situations.
Q) Who’s the perfect investor for QAW?
A) QAW is appropriate for traders in search of stability, consistency, and decrease drawdowns in their portfolios.
It will possibly serve equity-heavy HNIs seeking to easy general portfolio volatility, in addition to conservative traders who need fairness participation with draw back safety.
In truth, most diversified portfolios can profit from some allocation to methods like QAW, given its concentrate on uncorrelated return streams and disciplined danger administration.
(Disclaimer: Suggestions, solutions, views, and opinions given by consultants are their very own. These don’t signify the views of the Financial Instances)
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