1. Fund Presets & Stress Tests
-25%
2. Asset Allocation ($20B AUM)
40% ($8.0B)
35% ($7.0B)
15% ($3.0B)
10% ($2.0B)
3. Active Risk Overlay (The Hedge)
Tail Protection
30%
Pair Trade
20%
💡 Financial Reality Check: "Where is the Hedge?"
As highlighted in recent financial commentary on the $20B Situational AI fund, a thematic fund with 100% directional unhedged exposure is functionally identical to an ETF, despite charging institutional 2/20 hedge fund fees. Use this workbench to simulate how downside risk overlays (Put Options, Pair Short Baskets) alter drawdown trajectories and justify true alpha generation.
Downside Risk Profile: Unhedged Exposure vs. Hedged Strategy
Simulated Trajectory
Unhedged Drawdown
-$5.00B
-25.0% Loss
Hedged Portfolio P&L
-$3.05B
-15.3% Loss
Capital Protected
+$1.95B
Risk Overlay Offset
Value-at-Risk (95% VaR)
12.4%
vs 21.2% Unhedged
Institutional 2/20 Fee Structure vs. Passive ETF Comparison
| Fund Structure | Fee Model | Annual Mgmt Fee | Net P&L (Post-Shock) | Status / Justification |
|---|---|---|---|---|
| Unhedged AI Fund | 2% Management + 20% Perf | $400M / yr | -$5.40B | Glorified ETF |
| Hedged Risk Overlay Fund | 2% Management + 20% Perf | $400M / yr | -$3.45B | Active Risk Managed |
| Standard Thematic ETF | 0.20% Expense Ratio | $40M / yr | -$5.04B | Low Cost Directional |