Why unrealised protection doesn’t change outcomes
Institutional portfolios rarely underperform because their hedges are wrong.
They underperform because unrealised protection is never acted on.
Across FX, rates, and derivatives portfolios, hedges routinely perform as designed. Mark-to-market gains appear, risk metrics improve, and governance is satisfied.
Then nothing happens.
Gains remain theoretical. Carry persists. Liquidity tightens elsewhere. When markets normalise, protection evaporates without ever changing outcomes.
The failure is not technical. It is organisational.
When decision speed lags instrument behaviour, and authority is unclear, hedges stop being protection and start becoming deferred risk.
Read the CIO Brief
When Hedges Work – And Still Fail