Defensive & Diversifying Strategies in YTD 2022

What worked, what hasn’t?

June 2022. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Most defensive and diversifying strategies generated negative returns in YTD 2022
  • The correlation of almost all of these strategies to equities was too high
  • Only managed futures generated attractive diversification benefits


Economics and investing are all about data, eg GDP has increased by 1.5% this quarter, the stock market is down 10% this month, and so on. However, despite numbers being at the core of these disciplines, some rather important concepts are surprisingly vague. For example, what is a recession and what is a bear market?

A recession is defined as a significant economic decline over several months, but the National Bureau (NBR)’s Business Cycle Dating Committee in the U.S. only determines this with hindsight, ie we might be in a recession, but won’t have official confirmation for months. Naturally people recognize a recession while it is happening as unemployment increases and consumer confidence decreases.

Similarily, a bear market describes a situation when stock markets decline, but there is no clear definition for this. The most common perception is 20% decrease from the most recent peak, but for which index? The S&P 500, the Nasdaq, or Dow Jones?

In year-to-date 2022, the Nasdaq has decreased significantly by more than 20%, while the S&P 500 has just reached that level. Given this and the overall gloomy macro environment of high inflation and rising interest rates, investors are increasingly looking for alternatives.

In this short research note, we will evaluate the performance of defensive and diversifying strategies in year-to-date 2022 (read Defensive & Diversifying Strategies: What Worked in 2020?).


We are going to evaluate 14 diverse strategies that are frequently considered for diversifying equity portfolios. These are split into two groups namely defensive and diversifying strategies. The former are all available via ETFs, while the latter are hedge fund strategies, of which only some are available via publicly traded instruments.

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