Understanding the mathematics of losses should ultimately translate into portfolio construction. Not all defensive assets provide the same quality of protection. Mixing perceived security with real downside resilience is a costly mistake. For example, US Treasuries possess structural, battle-tested security: deep liquidity, government support, and a proven track record of holding value during equity declines.
In contrast, private debt may offer attractive returns, but may hide risks through illiquidity and limited price transparency. In periods of severe stress, it cannot reprice like public markets. Instead, liquidity may be disrupted.
This is an important distinction. In fact asset-backed investments, where hard collateral such as real property, equipment, or receivables underpin the value, provide a more solid and legally enforceable floor on recovery. Cash flow projections alone are not collateral.
*WealthSpring Capital LLC (WSC) is an SEC-registered investment advisor. Registration with the SEC does not imply any certain level of skill or training. The information presented in this article is for educational purposes only and does not constitute personal investment advice. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results.
