Daniel Villalon serves as the Global Co-Head of Portfolio Solutions at AQR Capital Management, where he plays a pivotal role in addressing the dynamic challenges of risk management for the firm’s clients. In this engaging episode of The Alpha Exchange with Dean Curnutt, Villalon delves into key areas of research conducted by his team, focusing on effective strategies for managing drawdowns and achieving diversification. Villalon contrasts options-based hedging with trend following strategies, highlighting the strengths and limitations of each in different market conditions. He explains how explicit, premium-based insurance can effectively mitigate rapid sell-offs, as seen during the Global Financial Crisis and the Covid crash, but may struggle during market recoveries. Conversely, trend following strategies, which buy assets trending higher and sell those trending lower, tend to perform better during slower drawdowns, as evidenced in 2022. Additionally, Villalon explores the concept of "under-reaction" as a possible explanation for the success of trend following strategies across various asset classes globally. He also discusses AQR’s insights on international diversification, emphasizing the potential benefits of investing in international equities given the current valuation landscape in the US. Join the conversation on The Alpha Exchange to gain valuable insights into risk management and diversification from one of the leading experts in portfolio solutions.