For 40 Years, the Market Has Been
Telling Us Something...
When realized volatility1 is higher, markets have historically struggled.
When realized volatility1 is lower, markets have often performed better.
Overview
Learn About Defined Volatility in 60 Seconds
A brief introduction to the strategy, the methodology, and why it was built for the real challenges advisors face in client relationships.
Advisor Journey
Where Are You in the Journey?
Every advisor encounters new ideas the same way: with skepticism, then curiosity, then questions, then evaluation, and finally, experimentation. Defined Volatility is no different. Below is the typical progression we see. There's no "right" pace. The goal is simply to move forward with clarity.
You're just becoming aware of Defined Volatility. At this stage, the most common questions are: What is this? Why does it exist? Is this just another product pitch?
Your focus is understanding the concept, not evaluating the product.
- Read the overview
- Review the HVAC analogy
- Explore "What Is Realized Volatility?"
You understand the idea of realized volatility and exposure adjustment, but you're asking: How is this different from what I'm already doing? Is this actually useful in practice? Where would this fit in a portfolio?
You're moving from awareness to relevance.
- Review the volatility & performance relationship
- Compare weighting approaches
- Read "What Defined Volatility Aims to Change"
Now you're evaluating. You want to see how the strategy behaves in different environments, how exposure actually changes, and what trade-offs look like in real markets.
This is the diligence phase.
- Explore the methodology walkthrough
- Review historical environment examples
- Download the implementation materials
You're thinking about specific client profiles, behavioral use cases, where this might sit in models, and how you would explain it.
The question is no longer "what is it?" โ it's "how would I use it?"
- Review advisor use cases
- Download the implementation kit
- Talk through positioning
You understand the strategy, the trade-offs, and the behavior it's designed to support. Now you're looking for confirmation, execution details, and a partner to walk through rollout.
This is where conversation matters.
- Schedule a discussion
- Review fund details
- Walk through client scenarios
Strategy
A Different Way to Manage Equity Risk โ Without Changing the Investment Story
Defined Volatility strategies are designed to keep portfolio risk within a defined volatility target over time using a transparent, rules-based process.
- Frame volatility more clearly in client conversations
- Reduce the need for reactive portfolio changes
- Maintain a more predictable risk profile through different market environments
The Challenge
Volatility Doesn't Just Affect Portfolios โ It Affects Behavior.
When markets move quickly, uncertainty rises. Advisors get pulled into urgent conversations, reactive decisions, and "what should we do now?" moments โ often when emotions are running highest.
Defined Volatility was built to address three common realities:
Broad index exposure can be efficient โ but it also means clients experience the full range of market swings. There is rarely any adjustment for how turbulent conditions have become.
Even disciplined advisors may not want to be in the business of tactical timing, constant rebalancing, or making "all-or-nothing" decisions. Yet traditional approaches often leave few alternatives when volatility spikes.
When volatility rises, the emotional experience can lead to poor outcomes โ selling low, delaying re-entry, or abandoning long-term plans. Advisors are left managing not just portfolios, but fear.
Defined Volatility is not designed to remove uncertainty or predict outcomes. It is designed to change how portfolios respond to changing market conditions โ so advisors don't have to rely solely on reaction, judgment calls, or perfect timing.
By systematically adjusting exposure based on realized volatility, the strategy takes the guesswork out of risk management and gives advisors a process narrative they can use with clients โ replacing "we're monitoring and waiting" with "the portfolio is following a disciplined framework that adjusts as conditions change."
The Methodology
Targeting Realized Volatility, Step-by-Step
Defined Volatility follows a simple, repeatable framework. No discretion. No gut calls. Just a consistent process applied over time.
The strategy monitors trailing realized volatility of the underlying equity exposure using a defined lookback window (commonly around 21 trading days).
In plain language: it measures how volatile the market has actually been โ not what it's expected to be.
That realized volatility reading is compared to a pre-defined volatility target. This creates a straightforward relationship:
- Realized volatility below target = room to add exposure
- Realized volatility above target = reduce exposure
Based on the size of that gap, the strategy adjusts exposure up or down using a systematic methodology.
- In lower-volatility environments, exposure may increase (including through the use of swaps, within defined limits)
- In higher-volatility environments, exposure may be reduced and allocated more to cash and/or short-term U.S. Treasuries
This process is applied repeatedly to maintain a defined volatility profile โ without discretionary decision-making.
- No "we think"
- No "this feels different"
- Just rules, applied the same way, every time
The methodology is designed to be explainable, reviewable, and repeatable.
- Advisors can understand it
- Clients can understand it
- The process can be clearly articulated in conversations and reviews
Investor Experience
What Clients Experience When Volatility Changes
Defined Volatility is not designed to make markets feel calm. It is designed to help portfolios behave more deliberately when conditions change.
Because exposure is regulated systematically, the investor experience is shaped less by reaction and more by process.
This is not about eliminating volatility. It's about managing how much volatility the portfolio carries as environments evolve.
When Volatility Rises
When market volatility increases, Defined Volatility strategies are designed to reduce equity exposure โ shifting a portion of the portfolio toward cash and/or U.S. Treasuries.
From an investor perspective, this may result in:
- Fewer extreme drawdowns during turbulent periods such as COVID and the Global Financial Crisis
- A clearer narrative that the portfolio is following a disciplined process
- Less pressure to make urgent, high-stakes decisions during market stress
- Reduced likelihood of panic-driven exits
Importantly, this does not mean losses disappear. It does mean risk is being carried more intentionally during difficult conditions.
When Volatility Declines
When market volatility eases, the strategy is designed to increase equity exposure โ re-engaging with market participation as conditions normalize.
This supports:
- Continued participation in growth environments
- Re-entry without requiring manual timing decisions
- Smoother behavioral transitions after stressful periods
- Staying aligned with long-term plans rather than waiting for "the right moment"
Again, this is not prediction. It is simply the same rules applied in a different environment.
Defined Volatility is designed to help reduce the likelihood of:
- Selling after large drawdowns
- Delaying re-entry after markets recover
- Abandoning long-term plans during stress
- Making binary "in or out" decisions at the worst moments
The Analogy
An Adaptive System for Managing Portfolio Risk
Defined Volatility is often misunderstood โ not because it's complex, but because it's explained in pieces instead of as a system.
A helpful way to understand how WEBs works is to think about a home's HVAC system with a smart thermostat and air-quality sensor. The goal isn't to eliminate temperature changes. It's to regulate conditions within a defined operating range as the outside environment constantly changes. WEBs function the same way inside an investment portfolio.
Before adjusting anything โ heating, cooling, or airflow โ a smart thermostat continuously measures past temperature fluctuations and recent variability in airflow. It isn't predicting next week's weather. It's registering the recent state of the environment.
WEBs begin by measuring realized volatility โ how variable the market has been over a recent period.
- No forecasting
- No emotional judgment
- Just objective measurement of market turbulence
We start by reading the air. WEBs monitor actual market volatility โ how variable the environment has recently been.
Every home has a preferred operating range โ say 70โ72 degrees. Outside that range, efficiency drops and stress on the system increases. The objective is a defined tolerance band, not a single perfect temperature. You set it once, and the system is designed to regulate conditions around it.
WEBs establish a target โ a preferred risk range the portfolio seeks to operate within over time. This target reflects risk discipline and long-term compounding efficiency, not comfort in every moment.
Next, we set the operating range. WEBs target a specific level of risk โ the portfolio's preferred volatility band.
A smart thermostat automatically activates heating, cooling, or airflow when conditions drift outside the target range.
- If temperature rises โ cooling engages
- If temperature falls โ heating engages
- If particulates rise โ filtration increases
Adjustments are incremental and rules-driven, not reactive or discretionary.
WEBs increase equity exposure when realized volatility is below target. WEBs reduce equity exposure when realized volatility rises.
- Rules-based adjustments
- Applied systematically
- Aligned with the volatility objective
- No abrupt, discretionary shifts
Exposure is adjusted between equities (SPY / QQQ exposure) and cash and/or U.S. Treasuries.
Then the system adapts. Exposure increases as conditions ease and trims back as variability rises โ automatically.
Exposure is primarily to a single underlying ETF (e.g., tracking the S&P 500 or Nasdaq-100 index) and may range from approximately 0% to 200% of the Fund's assets, with the remainder held in cash or cash-like instruments.
A thermostat is only as effective as the HVAC system behind it. Reliable climate control requires efficient equipment, well-designed ductwork, effective filtration, transparent diagnostics, and consistent execution of commands. Even the best thermostat fails if the system can't execute reliably.
WEBs are implemented through an ETF structure designed for consistent, disciplined execution:
- Transparent index methodology
- Daily holdings disclosure
- Liquidity and tradability
- Tax efficiency
- Predictable implementation
Adjustments are applied on a repeatable schedule and glidepath โ not as binary "in or out" moves.
Residents don't watch the sensors โ they notice whether conditions stay within tolerable ranges. A smart HVAC system results in less time at extreme temperatures, fewer abrupt reactions, and reduced energy waste from overcorrection.
Weather still changes outside. The system doesn't eliminate fluctuation โ it limits exposure to extremes.
- Volatility more often maintained near the target range
- Fewer extreme drawdowns during turbulent markets
- Planned adjustments for lower and higher volatility changes
- A return path shaped by disciplined exposure regulation
- Fewer behavior-driven mistakes during market stress
The result is a more regulated portfolio. Not every fluctuation disappears โ but risk exposure stays within a deliberate operating range.
Advisor Use Cases
Built for the Real Challenges Advisors Face
Defined Volatility was not created to win performance charts all the time. It was created to address a set of challenges advisors deal with in real client relationships and real market environments.
Most advisors do not want to be tactical market timers. At the same time, few are comfortable watching clients absorb full market volatility during chaotic periods. The tension is real: do nothing and ride it out, or intervene and risk being wrong?
Defined Volatility offers a systematic alternative โ adjusting exposure as volatility changes, without relying on prediction, discretion, or emotional calls. It doesn't require being "right." It requires being disciplined.
Many of the worst outcomes in portfolios are not analytical. They're behavioral.
- Selling after drawdowns
- Waiting too long to re-enter
- Abandoning plans under stress
These decisions often do more damage than the market itself.
By regulating exposure as volatility rises, the strategy is designed to reduce emotional pressure, support staying invested, and lower the likelihood of panic-driven exits. This doesn't remove fear. It reduces the need to act on it.
Explaining volatility to clients is hard. "Long-term" and "stay the course" only go so far when portfolios are moving quickly and headlines are loud.
Defined Volatility provides a process narrative, not just a performance narrative.
Instead of: "We're waiting this out."
You can say: "The portfolio is following a disciplined process that adjusts risk as conditions change."
Most advisors do not want to be in "all in" or "all out" positions. Binary decisions increase pressure, scrutiny, and regret.
Defined Volatility uses incremental, rules-based adjustments โ not switches. Exposure moves along a glidepath, not on and off. That supports consistency and reduces the stakes of any single decision.
It's easy to be disciplined in calm markets. It's much harder in chaotic ones.
Because the rules are defined in advance and applied consistently, the strategy removes discretion at the moments when discretion is hardest. This is risk management by design, not by willpower.
Defined Volatility does not predict markets or make discretionary calls. It responds to measured volatility, not forecasts, opinions, or headlines. Adjustments are rules-based and systematic โ not tactical.
Because exposure may be reduced during high-volatility periods, the strategy can lag during sharp, fast rebounds. This is one of the trade-offs of a disciplined risk approach. The objective is not to capture every rally โ it's to manage risk across full cycles.
- Hold lower-volatility stocks
- But remain fully invested
Defined Volatility adjusts how much exposure the portfolio carries, not just which stocks it holds. It is a different tool, with a different objective.
Defined Volatility does not prevent drawdowns or guarantee protection. Investors can still lose money. The strategy is designed to regulate exposure, not remove risk.
The HVAC analogy, process framing, and rules-based design are all intended to make the strategy explainable, not technical. Most advisors find it easier to explain a process than a prediction.
Some advisors use Defined Volatility as:
- A core equity alternative
- A behavioral support tool
- A model sleeve
- Or a complement to traditional equity exposure
There is no single "correct" use case. That's by design.
If you're asking these questions, you're asking the right ones.
The Funds
Defined Volatility in Practice
The concepts on this page are implemented through a family of Defined Volatility ETFs designed to apply the same risk-regulation framework across different market exposures.
The products are simply the delivery mechanism. The methodology is the foundation.Targets a defined volatility profile while providing exposure to the S&P 500.
Applies the same framework to Nasdaq-100 exposure for advisors seeking a higher-growth equity base with regulated risk.
Each strategy uses:
- Realized volatility as the input
- A defined volatility target as the objective
- Rules-based exposure adjustments
- An ETF structure for transparency and liquidity
WEBs also offers sector-focused Defined Volatility ETFs that apply the same framework within individual market segments โ designed for advisors who build sector-based models, want volatility regulation at the segment level, or use sector exposure tactically within broader portfolios.
Sector funds include targeted exposure across healthcare, technology, financials, consumer, industrials, energy, and more โ each applying the same Defined Volatility discipline.
Next Steps
Ready to Explore Fit for Your Practice?
If Defined Volatility resonates, the next step doesn't have to be a commitment. It can simply be a conversation.
Talk With Us
Schedule a conversation to walk through:- Your client profiles
- Portfolio structure
- Behavioral challenges
- Where Defined Volatility may (or may not) fit
Contact
Let's Talk.
Whether you have a specific question, want to explore fit for a client, or are ready to walk through the strategy in detail โ we're here for the conversation. No obligation. No pitch. Just a practical discussion.
Send Us a Message
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Park City, UT