Enhancing Portfolio Structures with Overlay Strategies
Part One: Treasury Futures Overlay



Overlay strategies are an investment approach that use a variety of investment vehicles to obtain, offset (hedge) or substitute specific portfolio exposures beyond those provided by the underlying physical investment portfolio. They may support effective management of risk exposures, liquidity and transaction costs across a broad range of applications, such as for investors looking to transition portfolios, protect against currency fluctuations or improve interest rate matching through a duration overlay. We focus our discussion on the latter, but the general principles may apply more broadly.


In the Ryan Labs Overlay Strategies white paper series, we address the three main vehicles used to deploy overlay strategies, namely: Treasury Futures, Repos, and Swaps. In this report we investigate Treasury Futures.