As investors, we expose ourselves to uncertainty. We do this with the ultimate goal of achieving financial gains that make it worthwhile. But we also want to remain within our own risk tolerance, which is the amount of loss we think we can endure without being driven to change our market exposure.

Our new special report looks at how portfolios may benefit from systematic downside protection. Asymmetric strategies (as achieved through an option-based hedging programme) can allow more potential upside for a given portfolio risk, enhance the reliability of returns and facilitate consistent portfolio goal-setting. 


The report also considers individual risk tolerance, the importance of distinguishing uncertainty from risk, the nature of recent market crises, and current challenges to investor perceptions.


Key takeaways:

  • We want to convert our risk tolerance into a source of opportunity. In doing that, we will always face uncertainty around market events and their timing. Adherence to strong convictions as events unfold can lead us to deviate from our investment objectives, potentially triggering undesirable market timing mistakes.
  • Consciously separating uncertainty (which we accept as a source of potential opportunity and loss) from risk (which we want to avoid taking on excessively) helps investors to take more efficient risk management decisions.
  • Systematic downside protection can be used to allow us to remain within risk tolerance levels, while extending upside exposure as far as possible.


The CIO Special below is available to download. Please refer to the Important Information at the end of the memo for disclosures and risk warnings.



In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.

Change of name: As part of Deutsche Bank’s Private Bank, the former International Private Bank also adopted this title on July 20, 2023.

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