When Rebalancing Fails and Construction Nirvana

In this episode of The Derivative, Jeff Malec is joined by Patrick Kazley of OneRiver explore how long volatility, convexity, trend following, and systematic macro can be combined in a capital‑efficient way to improve equity compounding and protect portfolios from major drawdowns. They discuss crisis “shapes,” why time-based rebalancing often beats intuitive drawdown triggers, how changing volatility microstructure (zero‑DTE, single-name vol, dispersion) creates new opportunities, and why behavioral biases keep most investors under-allocated to positively skewed defensive strategies. Patrick ties it all together with vivid metaphors — from F1 cars and soup vs. salad to sumo wrestlers and the beer boot — and explains how One River’s acquisition of a European alternatives/QIS team fits into their total-portfolio approach..… SEND IT!

Chapters:

00:00-02:21 = Intro

02:22-12:33= From AQR to One River – Patrick’s Background and the Case for Systematic Risk Mitigation

12:34-28:07 = Engines and Brakes – Equity Beta, Skew, and the Power of Convexity

28:08-43:55= Crisis Types, Trend Following, and Building a Total Portfolio Defense

43:56-1:03:04= Visualizing Risk – Crisis Shapes, Rebalancing, and the Math of Convexity

1:03:05-1:16:36= Metaphors, Markets, and M&A – From F1 Cars to Das Boot and One River’s Next Phase
1:16:37-1:28:37= Soup vs. Salad – Total Portfolio Thinking and the Future of One RiverFrom the Episode:

Blog post: A Short History of Market-Moving Middle East Conflicts

OneRiver's WhitepapersFollow along with Patrick and OneRiver on LinkedIn and make sure to check out OneRiver's website www.oneriveram.com

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