Request access

The Hedged Equity Strategy

A model allocation framework layering Structured Notes 
to enhance your existing portfolio strategy.

Find out how this strategy can work for your clients.

–

Request access

The biggest difference between institutional, high-net-worth, & retail investors: The Risk Management Gap

Institutions and high-net-worth investors have been using risk-managed strategies for decades to reduce risk, add diversification, and improve their overall risk-adjusted returns. Meanwhile, retail investors have had restricted access to risk-managed solutions—if not left out entirely.

However, financial advisors and their clients have had enough. Today, advisors are overwhelmingly making risk management a more fundamental element of portfolio construction. In a recent survey from Allianz Life, nearly 90% of financial advisors say that it’s more important to manage risk in their clients’ portfolios than it is to have the highest returns.

See benefits

The Challenge in Modern Portfolio Construction

01

Finally, a level of protection without sacrificing potential upside capture

But adding new products and diversifying across more asset classes in hopes of improving returns and reducing risk isn’t solving the problem.

Unfortunately, investors have not been rewarded: portfolios have become riskier while returns have stayed flat. But adding new products and diversifying across more asset classes in hopes of improving returns and reducing risk isn’t solving the problem.

Unfortunately, investors have not been rewarded: portfolios have become riskier while returns have stayed flat.

In 2023, to hit a 7% nominal return, investors may need twice as much risk as they did 30 years ago.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

02

Portfolio diversification with embedded structural downside. Adding more diversification doesn’t reduce risk, but adding the right kind can sure help

Many investors mistakenly believe that a 60/40 stock/bond portfolio is “well diversified”.

In reality, for a “balanced” allocation of core assets, equities may only be 60% of a portfolio, but often make up as much as 95% of a portfolio’s overall risk.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

Portfolio Construction

01

Finally, a level of protection without sacrificing potential upside capture

But adding new products and diversifying across more asset classes in hopes of improving returns and reducing risk isn’t solving the problem.

Unfortunately, investors have not been rewarded: portfolios have become riskier while returns have stayed flat. But adding new products and diversifying across more asset classes in hopes of improving returns and reducing risk isn’t solving the problem.

Unfortunately, investors have not been rewarded: portfolios have become riskier while returns have stayed flat.

In 2023, to hit a 7% nominal return, investors may need twice as much risk as they did 30 years ago.

Callan Institute – 2023-2032 Capital Markets Assumptions, as of June 2023. Certain information herein has been compiled by Callan and is based on information provided by a variety of sources believed to be reliable for which Callan has not necessarily verified the accuracy or completeness of or updated. This report is for informational purposes only and should not be construed as legal or tax advice on any matter. Any investment decision you make on the basis of this report is your sole responsibility. You should consult with legal and tax advisers before applying any of this information to your particular situation. Reference in this report to any product, service or entity should not be construed as a recommendation, approval, affiliation or endorsement of such product, service or entity by Callan. Past performance is no guarantee of future results. This report may consist of statements of opinion, which are made as of the date they are expressed and are not statements of fact.

Portfolio Diversification

Past performance does not guarantee future results, which may vary. This is for illustrative purposes only. T. Rowe Price, Asset Allocation Contribution to Risk: An Insightful Metric for Portfolio Construction, July 2017.

02

Portfolio diversification with embedded structural downside. Adding more diversification doesn’t reduce risk, but adding the right kind can sure help

Many investors mistakenly believe that a 60/40 stock/bond portfolio is “well diversified”.

In reality, for a “balanced” allocation of core assets, equities may only be 60% of a portfolio, but often make up as much as 95% of a portfolio’s overall risk.

A Better Hedged Equity

Layering Structured Notes for an Enhanced Portfolio

For decades, institutional and high-net-worth investors have had access to structured products with the potential to improve a portfolio’s risk-reward potential without disrupting core stock and bond allocations.

Due to the complexity of these strategies, small institutions, financial advisors, and individuals have largely been locked out of this approach.

Today, seamless access and education are helping advisors use Structured Notes to mitigate investment risk, enhance portfolio income, and improve a portfolio’s risk/return profile.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

How Layering Works

01

Enhanced equity upside potential, with added downside protection

By “layering” Structured Notes on top of a long equity sleeve, clients can enhance equity upside potential, with an added level of downside protection.

Halo’s Structured Note model allocation strategy complements traditional asset allocation approaches by rethinking the core-satellite approach.

A note enhanced strategy looks to maintain equity exposures clients and advisors are familiar with, but at a lower level of volatility than traditional sources of equity risk-return.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

02

An easier way to strengthen your core. Core-Satellite 2.0

Classic core-satellite investing separates a portfolio of investments into two distinct segments: a core and a satellite. The approach builds upon the importance of asset allocation. However, an overemphasis on asset allocations can leave portfolios unexpectedly exposed to more risk than many investors want.

By reimagining this strategy, Halo prefers to think of a portfolio as a series of layers, rather than rings moving ever further from the core.

Using the Core-Satellite 2.0, Structured Notes are layered over existing asset allocations creating a more effective risk hedge while retaining upside potential or income opportunities greater than market rates.

03

Getting Started with the Hedged Equity Strategy

U.S. Large Cap Core is a popular starting point for a reallocation strategy.
  • Experience shows that advisors like getting comfortable with how notes work. Starting small promotes stronger commitment from advisors, and clients.
  • Utilize the robust team of Halo Specialists to walk through our Halo Model Approach.
  • Once an advisor is comfortable with portfolio construction and implementation considerations, consider broader allocations throughout the equity portion of the portfolio.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

Equity Upside

01

Enhanced equity upside potential, with added downside protection

By “layering” Structured Notes on top of a long equity sleeve, clients can enhance equity upside potential, with an added level of downside protection.

Halo’s Structured Note model allocation strategy complements traditional asset allocation approaches by rethinking the core-satellite approach.

A note enhanced strategy looks to maintain equity exposures clients and advisors are familiar with, but at a lower level of volatility than traditional sources of equity risk-return.

Illustrative results

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

Core-Satellite 2.0

02

An easier way to strengthen your core. Core-Satellite 2.0

Classic core-satellite investing separates a portfolio of investments into two distinct segments: a core and a satellite. The approach builds upon the importance of asset allocation. However, an overemphasis on asset allocations can leave portfolios unexpectedly exposed to more risk than many investors want.

By reimagining this strategy, Halo prefers to think of a portfolio as a series of layers, rather than rings moving ever further from the core.

Using the Core-Satellite 2.0, Structured Notes are layered over existing asset allocations creating a more effective risk hedge while retaining upside potential or income opportunities greater than market rates.

Getting Started

03

Getting Started with the Hedged Equity Strategy

U.S. Large Cap Core is a popular starting point for a reallocation strategy.
  • Experience shows that advisors like getting comfortable with how notes work. Starting small promotes stronger commitment from advisors, and clients.
  • Utilize the robust team of Halo Specialists to walk through our Halo Model Approach.
  • Once an advisor is comfortable with portfolio construction and implementation considerations, consider broader allocations throughout the equity portion of the portfolio.

Source: Halo Investing. For illustrative purposes only. The information does not constitute a recommendation from Halo Investing. There is no guarantee that these objectives will be met.

Key Benefits

Improve Your Risk-Reward

By “layering” Structured Notes on current equity exposures, clients can enhance upside potential, with an added level of downside protection.

95%
of a “balanced” portfolio’s overall risk comes from equities

Strengthen Client Portfolios

Improve the investment experience with defined-outcomes and hedge against market risk, performance drag, and the behavioral gap.

1 in 3
investors plan to use structured products in the next 2 years

Grow Your Book

Strengthen your value-proposition and investment process by unlocking time to build relationships while boosting client retention and satisfaction.

78%
of financial professionals want support on portfolio construction and risk management

Where do Structured Notes fit in a portfolio?

Closing the Risk Gap

Until recently, most retail investors have been limited to conventional approaches to portfolio construction which typically include a focus on stocks-bonds and mean-variance optimization—all of which seem increasingly unable to satisfy return requirements while also leaving investors exposed to access risk.

While new asset allocation techniques have historically been out of reach for most investors, new platforms such as Halo’s enables forward-thinking advisors to explore asset allocation strategies that can help meet investment objectives with greater confidence.

Portfolio Hedging with Structured Notes

Check out our recent webinar discussing Halo’s Hedged Equity Strategy featuring Halo’s Co-Founder & President, Jason Barsema, alongside Christian Habitz and Robert Bower, CFA from The Invictus Collective.

Our latest thinking

The Halo Journal is the industry’s only resource dedicated to improving the investment experience with protective investments.

Model Portfolios are struggling, Structured Note SMAs can fill the gap

Model Portfolios Are Under Pressure: How Structured Note SMAs Fill the Gap

Advisor Insights • April 15, 2026

March Madness Market Volatility: Falling Stocks, $100 Oil, and Higher Rates

Advisor Insights • April 2, 2026

The Asset Allocation Framework Advisors Are Using to Prepare Portfolios for 2026

Advisor Insights • March 10, 2026
Rings of circles with a pin hitting the very center with accuracy

Positioning for Predictability: How Advisors Use Defined Outcomes to Lower Risk and Improve Portfolios

Advisor Insights • August 13, 2025

How to Unlock Uncorrelated High Income Strategies

Advisor Insights • May 20, 2025

More Investors Are Turning to Guaranteed Income Strategies—Here’s Why

Advisor Insights • May 12, 2025

Tackling the Retirement Crisis: A New Path to Financial Security

Advisor Insights • April 8, 2025
Market Forecasting Crystal Ball

Market Forecasting Is Hard: Here’s Your Uncertainty Hedge

Advisor Insights • March 20, 2025
Cover image for The Stay Invested Podcast featuring Phil Huber

Phil Huber, CFP, CFA on Asset Allocation, The Future of Alternative Investments, & The Allocator’s Edge

Advisor Insights • April 11, 2023
Small figure of a man in a suit standing on a stack of U.S. dollar bills

Interest Rate Cuts Appear on the Horizon: What Can Investors Do Now?

Advisor Insights • April 10, 2023
Visit the Halo Journal

The information provided here is neither tax nor legal advice and should not be relied on as such. Investment involves risk including possible loss of principal.

FOR INSTITUTIONAL, FINANCIAL PROFESSIONAL, PROFESSIONAL INVESTORS, AND WHOLESALE INVESTOR USE ONLY. This communication should not be distributed, in its current form, to end-investors, and it is for investment professionals only.

The material is for information purposes only. It is not intended for and should not be distributed to, or relied upon by, members of the public.

It is not intended to be a forecast, research or investment advice, and is not a recommendation, or an offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Reliance upon information in this material is at the sole risk and discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor.

Past performance is not a reliable indicator of current or future results.

US125/1.0/2308