Active Trading and Hedging Strategies

At Avalon, disciplined risk management is the cornerstone of sustainable performance. Our approach goes beyond merely chasing returns—we combine rigorous data analysis, fundamental research, and tactical execution to hedge risk and capitalize on emerging opportunities. Whether markets trend up or down, our overarching goal remains the same: protect capital while seeking asymmetric returns.

Hedging Strategies: A Disciplined Approach to Risk and Opportunity

Our investment philosophy centers on anticipating market shifts rather than reacting to them. Rather than trying to predict the unpredictable, we focus on maximizing control over known risks while minimizing exposure to external shocks. This philosophy informs our entire process:

• Proactive Defence

We design our hedges in advance, using quantitative models that stress-test potential downside scenarios. We can protect gains by staying ahead of market volatility even when conditions turn turbulent.

• Strategic Flexibility

We monitor macroeconomic indicators, asset correlations, and sentiment data to pivot swiftly if needed. This agility helps us respond to short-term market dislocations without losing sight of our longer-term objectives.

• Exploiting Inefficiencies

We do not subscribe to the efficient market theory. Instead, we leverage overlooked segments—such as micro-cap equities early in their growth curve and pre-regulated environments —where we believe in missed-priced opportunities. Large investment funds with strict mandates cannot fully participate in some corners of the market. It offers a significant upside when opportunities risk metrics shift from high-risk to low-risk, allowing more market participants to enter.

Our Hedging Framework

Our hedging strategies focus on downside protection while maintaining access to attractive, high-growth opportunities. By combining data-driven insights with real-time market monitoring, we dynamically adjust exposure. Key elements include:

1. Strategic Use of Derivatives

We lock in gains and buffer against price drops through options, futures, and other derivatives. This approach lets us maintain growth potential without exposing the portfolio to unchecked risk.

2. Adaptive Asset Allocation

Our allocations can include equities, crypto, fixed income, and cash equivalents, all governed by strict risk parameters. This multi-asset flexibility lets us pivot to defensive positions or amplify promising trends as market conditions evolve.

3. Rigorous Risk Controls

We adhere to caps on leverage and position sizes, which are detailed in our Offering Memorandum. Leverage typically remains under 5x, ensuring we avoid outsized exposure that could compromise overall portfolio stability.

4. Continuous Monitoring & Recalibration

Markets move quickly, and our portfolio does too. Regular stress-testing and correlation studies guide ongoing rebalancing, ensuring our hedges remain responsive to any shift in volatility or market direction.

Asset Allocation & Risk Parameters

Our strategy spans multiple asset classes but maintains a concentrated focus and nimbleness. Allowing for reactions to moment-by-moment changes in market conditions that are lightning-quick.

• Crypto: Up to 50%

• Equities: Up to 50%

• Options/Futures: Up to 30%

• Fixed Income: Up to 35%

• Cash Equivalents: Up to 20%

We generally maintain a medium to medium-high risk profile with a shorter-term investment horizon—though this can be flexibly managed based on real-time data. The overarching goal is to optimize capital efficiency while mitigating potential drawdowns.

Analytical Precision: Data-Driven Risk Management

Our analysts are integral to both investment and risk-management decisions. Their responsibilities include:

• Financial Data Analysis & Modelling

Performing valuations, discounted cash flow (DCF) assessments, and comparative market analyses to spot mis-priced opportunities and potential downside risks.

• Market Research & Transaction Support

Conducting due diligence and industry research to maintain up-to-date intelligence on global trends, which helps shape tactical asset tilts.

• Portfolio Optimization

Constructing and recalibrating risk-adjusted allocations that align with the prevailing market climate, aiming for capital preservation and incremental growth.

• Portfolio Optimization

Proprietary quantitative models for risk control and market timing ensure each hedge targets specific vulnerabilities in the portfolio.

Combining deep fundamental research with sophisticated quantitative tools, we ground every investment decision in solid data rather than speculation.

Active Trading Strategies

1. Proven Track Record

We have navigated every major market correction since 2004 by proactively adjusting allocations and hedges, preserving investor capital when it matters most.

2. Unconventional Thinking

We step outside the herd mentality, targeting market inefficiencies often overlooked by larger, more constrained funds. This approach positions us to capture superior returns in niches that remain under-analyzed.

3. Elite Execution

Our traders are specialists who move with precision, utilizing nearly two decades of back-tested indicators. Their agility allows for rapid adaptation when market signals shift.

4. Adaptive Quant Strategies

We integrate a proven quantitative element into our existing frameworks, enhancing the speed and accuracy of our risk assessments. This additional layer of sophistication has already shown meaningful, positive results.

5. First Mindset

While we pursue growth, capital preservation remains paramount. We deploy dynamic hedges and maintain liquidity to mitigate sudden drawdowns, ensuring that surprises become opportunities, not setbacks.

Active Trading & Portfolio Balancing

Maintaining a tactical balance is central to our philosophy. Through active trading, we can shift exposures as market signals evolve. Also, allowing for our long-term growth strategies to play out without having mandates to rebalance:

• Data-Driven Risk Controls

Quantitative models evaluate each position's contribution to overall volatility. If a trade poses an outsized risk, we rebalance, either scaling down or employing derivatives for protection.

• Tactical Tilts

We're not afraid to pivot in turbulent markets. Short-term tilts allow us to exploit momentary dislocations or protect gains in overheated sectors.

• Capital Efficiency & Liquidity

By actively managing positions, we maintain adequate liquidity to capitalize on sudden opportunities. Our goal is to turn volatility into an entry point for future gains, rather than a source of losses.

Conclusion

At Avalon, we understand that navigating today's markets requires vigilance and adaptability. Our commitment to disciplined hedging, active trading, and strategic portfolio balancing underpins everything we do. By optimizing exposure to high-potential assets and cushioning against downside risk, we aim to deliver consistent, risk-adjusted growth over time.

Invest with Avalon to experience a team that doesn't leave performance to chance. Through data-backed decisions, nimble execution, and a steadfast focus on capital preservation, we strive to engineer outcomes—even in the face of market uncertainty.

Ready to Learn More?

Contact us today to explore how Avalon's hedging strategies and active trading solutions can work for your investment goals.