Risk Overlay
for fund managers
Protect gains. Reduce drawdown. Stabilize the NAV curve. An operational system that turns volatility into consistency — without replacing your thesis.
* Average metrics based on real situations and backtest averages. Each project has its own performance improvement.
The market doesn't need more promises. It needs operational protection.
CornerStone Markets has developed a proprietary and effective Risk Overlay methodology for implementation in investment funds. Our system adequately protects the gains achieved — stabilizing performance and shielding operations against market shocks.
After implementation and process optimization in over 60 investment funds in Brazil and abroad, we identified that the biggest challenges are: 1. Maintaining the generated alpha and 2. Protecting the NAV curve in unexpected moments.
The good news is that our system always adds value and performance. Always.
Our system does not eliminate risk, does not replace the manager's thesis, and does not guarantee predictable returns. Its effectiveness and performance depend on the mandate, instrument liquidity, hedge cost, and implementation discipline.
The impact of the overlay on the NAV curve
An illustrative comparison of how our Risk Overlay smooths the curve and protects accumulated gains.
Illustrative chart. Actual results depend on fund type, mandate, and market conditions.
Operational overlay that protects without interfering
A protection layer that works alongside the manager's strategy — not against it.
P&L Protection
Shields accumulated gains so that a single tail event doesn't erase what your fund built throughout the year. Tactical protection that locks in results.
Drawdown Reduction
Smooths the NAV curve in high-uncertainty moments. Less drawdown means more investor confidence, higher Sharpe ratio, and lower redemption risk.
Dynamic Hedging
Tactical hedge that follows the market and automatically adjusts coverage. Reduces gross exposure in operational uncertainty moments without liquidating positions.
NAV Curve Stabilization
More stable results generate more attractive track records. Facilitates fundraising on platforms and institutional channels that value consistency.
Tailored for each type of fund
Any fund with hedgeable exposure and sensitivity to drawdown is a candidate. Here's how we help each profile.
Multi-Strategy / Macro
Very highLosing accumulated P&L in a single tail event
Keep your alpha, but protect your drawdown. Ensure the year's bonus doesn't evaporate in one crisis week.
Long Biased Equity
Very highGetting stuck in a long position while the market drops
Stay invested in companies, but hedged in the market. Dynamically reduce portfolio beta when the scenario shifts.
Pension / Institutional
HighReputational risk from nominal losses
Institutional-grade security. Help the pension fund manager sleep well knowing a system is protecting the NAV.
Family Offices / Exclusive
Very highEmotional drawdown from the asset owner
Customized protection for each family's exact profile. Ensure the estate doesn't suffer oscillations that keep the patriarch awake.
Long & Short / Market Neutral
HighSudden decorrelation and residual beta
Zero the market residual that keeps showing up. Security for the manager to focus solely on pair selection.
FX & Commodities
Medium-HighViolent trend reversals
Protect the trend's gain. Don't let a single day's variation eat the month's entire profit.
Real scenarios our overlay solves
Concrete problems that fund managers face daily.
The fund lost 8% in a week. Investors are panicking.
Our overlay detects stress signals and activates tactical hedges before the loss deepens. It smooths the impact and preserves what was built over months.
The fund has good returns, but the volatile NAV curve scares investors.
A more stable curve translates into a higher Sharpe ratio and a track record that sells itself on distribution platforms and to institutional allocators.
The fund is up 15% YTD. The manager fears giving it all back.
We lock in accrued gains through dynamic hedging. The strategy keeps running, but the floor is protected — the year-end bonus doesn't evaporate.
The regulator demands risk controls, but the team is small.
An automated overlay that operates within the fund's mandate, with full audit trail. Operational discipline without additional headcount.
What managers say about our approach
“The concept of an operational overlay without interfering with our thesis was exactly what was missing. We were spending too much time on manual hedging decisions.”
Portfolio Manager
Long Biased Equity Fund, AUM €120M
“Our biggest challenge was explaining drawdowns to investors. With a more stable NAV curve, the conversation about fundraising became much easier.”
Managing Director
Multi-Strategy Fund, AUM €85M
“As a family office, our priority is capital preservation. The overlay gave us the protection layer we were looking for without changing our investment approach.”
CIO
Family Office, AUM €60M
What makes CornerStone Markets different
We protect, we don't predict
Our system doesn't try to forecast the market. It protects what has already been achieved. A paradigm shift for managers who understand that preserving capital is as important as generating it.
Overlay, not substitution
We work alongside the manager's existing strategy. No position interference, no thesis changes — just an additional protection layer that activates when it matters.
NAV curve as a sales tool
Consistent results generate loyal investors. A stabler Sharpe ratio facilitates distribution on brokerages and institutional platforms. Your track record becomes your best salesperson.
Frequently asked questions
Our pricing model adapts to the fund's size and complexity. We work with performance-based and fixed-fee models. Schedule a demo to discuss the best structure for your fund.
The system operates as an execution layer alongside your existing infrastructure. It is compatible with most prime brokers and trading platforms in the market, without requiring migration.
It depends on the fund type and mandate. Typically: index futures, options, FX futures, commodity futures, and ETFs. The system selects the most liquid and cost-efficient instruments for each scenario.
No. The overlay is an additional protection layer that works alongside your existing team and processes. It automates tactical hedge decisions, freeing the team to focus on strategy.
Typically less than 24 hours for initial integration. After a calibration period of 1-2 weeks where we map the fund's risk profile, the system is fully operational.
Yes. The system is fully parameterizable. You define the acceptable drawdown thresholds, maximum hedge coverage, and the degree of protection aggressiveness according to your fund's mandate.
Schedule your free demo
See in 30 minutes how our risk overlay can protect your fund's operations. No commitment.