Architecture of Alpha: The Overlay Evolution

Designed for portfolios seeking to dampen downside volatility without liquidating core holdings. We utilize a systematic options strategy (typically collar structures or variance swaps) to cap maximum drawdown exposure.

Best for: Pension funds managing liability gaps, endowments with spending smoothing requirements, or balanced mandates where capital preservation is paramount.

Implementation: Utilizes liquid exchange-traded derivatives. Positions are rebalanced weekly based on volatility regime detection.

This overlay layer focuses on generating uncorrelated alpha. It operates independently of the base portfolio's asset allocation. LaRoute deploys quantitative equity and bond strategies using futures and total return swaps.

Best for: Institutional investors holding low-beta passive indices who wish to enhance returns without changing their strategic allocation.

Methodology: Short-term momentum and mean-reversion signals applied to broad indices. Risk is scaled dynamically to maintain target volatility.

Addresses the inefficiency of holding excess cash. By using inverse floaters or interest rate overlays, we effectively monetize cash balances while maintaining immediate liquidity access.

Best for: Foundations with irregular spending patterns, or asset managers navigating transition periods between mandates.

Mechanism: Cash is deployed into short-duration, high-quality collateralized strategies via OTC agreements, optimized for daily liquidity windows.