A Disciplined, Rules-Based Framework for Portfolio Risk Management
Under normal market conditions, diversification provides stability and serves as a key risk-mitigation tool. During periods of market stress or regime change, however, correlations can break down, and portfolios may incur losses beyond expectations. In such environments, both further downside and potential recovery become difficult to predict, making discretionary decision-making vulnerable to emotional bias.
The SATID methodology addresses this challenge through continuous monitoring of each portfolio investment, ensuring it behaves in line with its original assumptions and objectives. Defined thresholds identify when an investment is at risk, prompting timely and disciplined intervention.
By aggregating these thresholds, SATID quantifies the maximum drawdown a portfolio is expected to experience under normal conditions—beyond which action is required.
In addition, SATID incorporates continuously updated correlation and volatility data to derive a dynamic risk factor, indicating the probability that each investment will reach its risk threshold. The methodology operates across three core components:
For each investment, SATID calculates a dynamic risk threshold using an optimized, transparent algorithm updated weekly. While the algorithm determines the optimal level, thresholds can be customized to align with specific portfolio risk requirements.
Individual investment risks are aggregated at the asset-class and total-portfolio levels, ensuring alignment with the client's stated risk tolerance. This process establishes actionable limits, shifting portfolio management from a benchmark-driven approach to an actively risk-managed framework.
A proprietary, forward-looking risk score—based on 13-week rolling correlations and volatility—provides dynamic one-week and one-month assessments. The SATID Score acts as a portfolio health check, highlighting the condition of each investment and anticipating which holdings may require reassessment.
SATID uses benchmarks as an initial reference, benefiting from diversification and long-term growth potential. However, it systematically deviates when the portfolio's trajectory no longer aligns with the client's mandate. During downturns, SATID replaces benchmark-centric management with a dynamic, rules-based risk discipline that prioritizes downside protection without compromising long-term growth.
This enables investors to allocate capital with confidence and transparency, clearly understanding portfolio boundaries and anticipating when investments approach reassessment—delivering discipline and peace of mind across all market conditions.