Portfolio Enhancement
for a New Market Regime
First Principle, powered by The Invictus Collective, designs structured-note portfolios that convert equity volatility into systematic, stable income and asymmetric payoff profiles. We believe our approach is suited for today’s volatility and correlation regime, and is engineered to integrate into existing equity and credit allocations—not replace them.
The Regime Shift
Capital market assumptions have shifted materially. Forward equity returns are lower, volatility is structurally higher, and traditional diversification is less reliable. We believe that the portfolio construction playbook that worked in the Quantitative Easing era requires recalibration for today’s and tomorrow’s regime. Explore our institutional expertise and learn how we apply systematic frameworks to portfolio enhancement.
2010–2019: QE-Dominated Regime
Beta, multiple expansion, and negative stock–bond correlation did most of the work; traditional 60/40 was an efficient default core.
2020–2025: Elevated Volatility Regime
Drawdowns are sharper and diversification delivers less; portfolios need more efficient payoff design per unit of risk budget.
2026- Capital Market Outlook
The opportunity is to treat volatility and payoff shape as explicit design variables—structured-note sleeves become a rational complement to traditional beta.
Sources: JPMorgan, BlackRock, Goldman Sachs Capital Market Assumptions; Bloomberg.
Our Solution: Payoff Engineering
We construct diversified, rules-based portfolios of structured notes that are designed to harvest index option premium across major indices (SPX, NDX, RUT, SX5E). The objective is to convert volatility and skew into stable income and convex payoff profiles while keeping the overall portfolio aligned with existing policy benchmarks and risk budgets. Learn more about our structured note strategy and implementation framework.
Systematic Volatility Capture
We implement disciplined option-selling programs across diversified index underlyings, targeting the structural gap between implied and realized volatility rather than short-term market calls. Position sizing, tenor, and strike selection are driven by a systematic framework that anchors to risk budget and path-dependent drawdown controls.
Engineered Payoff Geometry
Barrier levels, coupon structures, and maturities are engineered to reshape the distribution of outcomes relative to long-only equity or credit. Notes typically employ transparent barriers (e.g., 50–80% of initial index level) and clearly defined downside participation, allowing ex-ante mapping of behavior under stress, in range-bound markets, and in modestly rising environments.
Institutional Integration & Governance
Structured-note sleeves are sized and slotted into existing equity or fixed income allocations—not layered on top. We aim to provide position-level transparency, issuer diversification, and attribution that can be mapped into existing risk, performance, and compliance systems, enabling CIOs and investment committees to monitor the sleeve alongside core exposures.
Implementation Use Cases
Start with the problem you’re trying to solve. It is our belief that structured-note portfolios can be used to enhance income, reshape equity risk, or simplify alternative credit exposure. Choose the role that best fits your mandate, then see how the sleeve behaves in our portfolio simulator.
Enhance Core Fixed Income
You need higher, more stable cash flow from your bond allocation without extending duration or taking on opaque credit risk.
How we implement it: Replace 10–20% of traditional fixed income with structured income sleeves, targeting higher cash yields with defined barrier levels and no duration risk. The sleeve is sized to remain within existing fixed income risk budgets with the potential to improve income and drawdown characteristics.
Reshape Equity Drawdowns
You want to maintain equity-like return potential but reduce the frequency and severity of drawdowns in your core equity allocation.
How we implement it: Reallocate 15–25% of core equity exposure into structured equity sleeves, maintaining equity-like return potential while introducing buffers, path-dependent income, and potentially improved downside asymmetry. The objective is to reshape the distribution of equity outcomes, not simply add leverage.
Simplify Alternative Credit
You need competitive yields relative to high-yield or alternative credit, but with clearer payoff mechanics and more explicit downside parameters.
How we implement it: Substitute structured income portfolios for portions of high-yield or alternative credit allocations, targeting comparable or higher yields with more transparent payoff mechanics and explicit barrier-based risk parameters. This is designed to have the potential to both simplify risk and preserve income.
Request a Deck or Schedule a Call
Connect with our team to discuss how structured-note portfolios can be integrated into your institutional allocation framework. We provide detailed analytics, scenario analysis, and implementation roadmaps.