Building A Portfolio to Withstand a Black Swan Event

A Discussion on Leverage
Tingting Zhang, Ph.D., Founder and CEO, The TerraCotta Group

As we head into the 10th year of economic expansion since the Great Recession, the concern over the onset of another cyclical recession is top of mind for many investors. Regardless of our opinion as to whether and when a recession may hit us, it is certainly timely for a discussion around how to build a defensive portfolio, safeguarded against macroeconomic shocks. This white paper on leverage is a part of a series of discussions on how to build a portfolio against a black swan event. Importantly, this paper is not meant to be a universal tutorial for how to construct leverage – because there is no one-size-fits-all approach. Rather, it is a discussion of our journey towards the crafting of a leverage structure tailored to our investment strategy and built to interact with our investment portfolio— and more importantly, to ensure strong portfolio performance through various macroeconomic shocks and potential stress.