Risk Overview
Risk sits upstream of every strategy decision we make. The first number we look at is not what the strategy made, but what it could have lost.
The categories
| Category | What it is | Covered in |
|---|---|---|
| Market and strategy | The strategy loses money because trends fail or reverse | Market & Strategy Risk |
| Venue and counterparty | An exchange the strategy trades on fails, halts or becomes insolvent | Venue, Counterparty & Curator Risk |
| Liquidity and redemption | You cannot exit at the price or on the timeline you expected | Venue, Counterparty & Curator Risk |
| Platform and smart contract | A bug in the vault, or a compromised operational key | Security, Vault Protections |
| Regulatory and external | Law, sanctions or jurisdictional access changes | Regional Availability |
What the controls do
| Control | Addresses | Mechanism |
|---|---|---|
| Volatility targeting | Market | Positions scale down as realised volatility rises |
| Equal risk contribution | Market | No sector can dominate portfolio variance |
| Sector and instrument caps | Market | Hard limits on idiosyncratic exposure |
| Gross notional cap | Market, venue | Total exposure bounded as a fraction of NAV |
| Separated signing keys | Platform | Valuation and settlement are different permissions |
| NAV sanity guards | Platform | A valuation that fails a check is never settled |
| Reduce-only closes, per-cycle locks | Venue | Bounds the damage from a malfunctioning cycle |
| Signal staleness rule | Venue | Stale signal means hold the book, never flatten it |
What the controls do not do
They cannot make a losing strategy profitable, keep an external venue solvent, guarantee liquidity when the portfolio needs to exit, or protect against a bug in code that has not been audited.
Specifically:
- The strategy is expected to have losing years. Trend-following is a multi-year proposition.
- Our own curator and executor code has not been through a third-party audit. Only the Lagoon vault framework has.
- Settlement depends on our backend. Redemption is onchain, but pricing shares requires a NAV push, so an extended outage queues redemptions.
- The strategy went live on 27 May 2026. There is not yet a long live track record.
Sizing
A CTA sleeve is a diversifier. Its value comes from being uncorrelated with the rest of a portfolio, which is an argument for holding some and against holding a lot. We do not publish a recommended allocation and do not give investment advice.
The formal statement is at Risk Warnings and Disclaimers.