Key Takeaways
- • Seeyond Volatility Alternative Income (Ostrum Asset Management, Natixis affiliate) won The Hedge Fund Journal's UCITS Hedge 2024 award for best performing volatility trading strategy over the 10-year period ending December 2023.
- • The strategy employs a contrarian systematic approach with discretionary overlay, dynamically allocating between delta-hedged short strangles and short puts to harvest volatility risk premium across US, European, and Asian equity markets.
- • Unlike most VRP strategies that focus exclusively on US equity volatility, this fund trades volatility globally using only exchange-traded instruments with zero OTC exposure, reducing counterparty risk.
- • The strategy deliberately increases risk exposure when implied volatility is elevated following market shocks, while harvesting carry during calmer market conditions—a contrarian rebalancing mechanism that has included discretionary risk reduction ahead of tail events like Volmageddon 2018.
- • Lead Manager Simon Aninat emphasizes crisis survivability as fundamental to the approach: "You need to be able to survive a crisis to add more risk during it. We sometimes need to win by not losing."
Summary
Seeyond Volatility Alternative Income, the volatility-focused strategy managed within Ostrum Asset Management (a Natixis affiliate), has been recognized as the best-performing discretionary volatility trading strategy over a decade, according to The Hedge Fund Journal's 2024 UCITS Hedge awards based on performance through December 2023.
The strategy represents a refined approach to volatility risk premium harvesting that distinguishes itself through three core operational characteristics. First, it employs a hybrid methodology combining systematic models with discretionary overlays, dynamically allocating capital between delta-hedged short strangles and short puts. The tactical element centers on post-shock put sales to increase directional equity exposure while emphasizing carry harvesting from the VRP during lower volatility regimes. Second, geographic diversification sets this fund apart from conventional VRP strategies: whereas most competitors concentrate on US equity volatility, Seeyond extends its trading mandate to European and Asian markets, materially broadening the opportunity set. Third, the fund maintains a deliberately conservative risk infrastructure, utilizing only exchange-traded instruments with complete avoidance of over-the-counter derivatives, eliminating bilateral counterparty exposure.
A defining feature is the strategy's contrarian risk management posture. Rather than maintaining steady or procyclical VRP exposure as many peers do, Seeyond's models actively increase overall risk allocation when implied volatility spikes—the inverse of conventional risk reduction during stress. This contrarian rebalancing has included discretionary downside protection mechanisms; historical examples cited include proactive risk reduction ahead of the 2018 Volmageddon episode. Lead Manager Simon Aninat frames this philosophy operationally: "You need to be able to survive a crisis to add more risk during it. We sometimes need to win by not losing."
The fund's naming convention, conceived during the zero interest rate policy (ZIRP) era as "alternative income," should be recalibrated by investors as a volatility and equity risk premium strategy. The decade-long performance recognition reflects both the consistency of this approach and its resilience through multiple market regimes, from the low-volatility years post-2016 through the pandemic-era turbulence and post-ZIRP normalization period.
The strategy represents a refined approach to volatility risk premium harvesting that distinguishes itself through three core operational characteristics. First, it employs a hybrid methodology combining systematic models with discretionary overlays, dynamically allocating capital between delta-hedged short strangles and short puts. The tactical element centers on post-shock put sales to increase directional equity exposure while emphasizing carry harvesting from the VRP during lower volatility regimes. Second, geographic diversification sets this fund apart from conventional VRP strategies: whereas most competitors concentrate on US equity volatility, Seeyond extends its trading mandate to European and Asian markets, materially broadening the opportunity set. Third, the fund maintains a deliberately conservative risk infrastructure, utilizing only exchange-traded instruments with complete avoidance of over-the-counter derivatives, eliminating bilateral counterparty exposure.
A defining feature is the strategy's contrarian risk management posture. Rather than maintaining steady or procyclical VRP exposure as many peers do, Seeyond's models actively increase overall risk allocation when implied volatility spikes—the inverse of conventional risk reduction during stress. This contrarian rebalancing has included discretionary downside protection mechanisms; historical examples cited include proactive risk reduction ahead of the 2018 Volmageddon episode. Lead Manager Simon Aninat frames this philosophy operationally: "You need to be able to survive a crisis to add more risk during it. We sometimes need to win by not losing."
The fund's naming convention, conceived during the zero interest rate policy (ZIRP) era as "alternative income," should be recalibrated by investors as a volatility and equity risk premium strategy. The decade-long performance recognition reflects both the consistency of this approach and its resilience through multiple market regimes, from the low-volatility years post-2016 through the pandemic-era turbulence and post-ZIRP normalization period.
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