Bloomberg Surveillance Sep 25, 2026
With Karan Sood, CEO and Co-founder of Vest
Vest manages $75 billion across more than 100 versions of funds that use options to limit how much an investor can lose in the S&P 500 over a set period.
Most investors try to manage risk by owning a little of everything: stocks, bonds, commodities, private assets. Karan Sood said those holdings often carry the same underlying risk and start moving together in a crisis. His firm's answer is to pay someone else to take the worst losses.
"And derivatives options are the insurance of capital markets."
Karan Sood, CEO and co-founder of Vest, on Bloomberg Surveillance. Vest describes itself as the firm that pioneered target outcome investing, and he runs the $75 billion book of these funds that financial advisers now buy for their wealthy clients.
The full segment is covered here so you can skip it.
Here are the 6 lessons that matter.
Key Takeaways
Portfolios that look diversified can share one risk, and in a crisis the holdings start moving together
Options work like insurance, and investors can pay for the protection by giving up some of the upside
A 20% buffer means a 12% market fall leaves the fund flat over the year, before fees and expenses
Right now 10% of protection over one year comes with gains capped at about 15%
Vest runs $75 billion across more than 100 versions with different buffers and caps
Financial advisers, not self-directed investors, are the main buyers
Institutions use the funds as hedged exposure at under 1% a year instead of paying hedge-fund fees
What investors are buying is certainty that the money is there when a bill comes due
1. Diversification's Blind Spot
The segment opened with the host saying investors are petrified, and that the industry invented buffered funds and target outcome funds built on derivatives because people are scared stiff. He asked whether that fear is normal.
Investors are admitting their portfolios are less diversified than they look
"Well, I think there's an emerging risk that people are acknowledging that they haven't for a while, which is portfolios are not as diversified." — Karan Sood
A portfolio can hold some stocks, some bonds, some commodities and some private assets and still look diversified on the surface, Sood said.
In a crisis, holdings that did not move together start to
"But it's the same risk, apparently, that is connecting a lot of them. And you can have times of crisis where apparently everything is non-correlated, suddenly becomes correlated." — Karan Sood
The result, he said, can be negative alpha during a crisis, meaning returns below the benchmark.
