Risk architecture
A concentrated portfolio can create meaningful upside when research is correct, but concentration also makes errors expensive. Risk management therefore begins before a position is entered: the thesis, downside, liquidity and interaction with the rest of the portfolio must be clear.
Position size is an underwriting decision
Position size should reflect more than confidence. Expected return, valuation, liquidity, volatility, correlation, and the consequences of a broken thesis all affect how much capital can be allocated responsibly. A strong idea can still be the wrong size.
Derivatives can change the shape of exposure
Derivatives can be used to reduce market sensitivity, express a macroeconomic view or define downside more precisely. Their role is not to conceal risk or manufacture leverage. They are tools for adjusting the portfolio's payoff profile when direct equity exposure alone is inefficient.
Risk control should preserve the ability to be right while limiting the damage caused by timing, correlation or an incorrect thesis.
Conviction must remain reviewable
Priori continuously separates changes in price from changes in value. Volatility alone is not a reason to exit, but new evidence is. Positions are re-underwritten as company results, macro conditions, and market narratives evolve.
- Reduce exposure when the underwriting case weakens.
- Retain or add exposure when price dislocates but the evidence improves.
- Take profit or redeploy when expected return compresses.
- Avoid combining excessive leverage with uncertain outcomes.