Bloomberg Surveillance · Friday, September 25, 2026
Karan Sinha of Vest noted that investors are becoming more aware of the hidden risks and lack of true diversification in their portfolios, leading to a desire for risk transfer. He explained that derivatives act as insurance in capital markets, allowing investors to mitigate downside risk, often by selling a portion of the upside potential.
“Well, I think there's an emerging risk that people are acknowledging that they haven't for a while, which is portfolios are not as diversified. They look diversified on the surface. You got a little bit of stocks. You got a little bit of bonds. You got some commodities. You got some private assets built in. But it's the same risk, apparently, that is connecting a lot of them.”
“Another way to risk manage is to actively risk transfer. So take certain parts of the left tail of the distribution and say, we don't want it. And you can use derivatives to take that, to pay somebody to take that off your hands. So quite like insurance, right?”