What is Low Risk Investing?

I went to a wealth conference for high net worth individuals, because I knew one of the brokers (I'm not a high net worth individual). This firm is a global brand with $540B or so under management. He spoke in very simple terms, as if these people knew about as much about markets as your average person who reads the paper. The lead speaker tried to explain their Dynamic Asset Allocation strategy, that purported to lower risk. It did this by basically emulating a put option, also known as Portfolio Insurance, reducing equity exposure in draw downs (Leland and O'Brian and Rubinstein famously did this with a lot of money, exacerbating the the 1987 stock-market crash). It's not a bad tactic, but seems rather fragile, as such a rule clearly would have helped in 2008 as the increase in volatility occurred prior to the big drawdown in the second half of 2008, but other than that the time series data generally shows that such a rule merely lowers one's return.

But I was most interested that the practitioner insisted this lowered volatility, specifically drawdowns, and did not lower returns. It seems that lower risk is only tolerable if it doesn't hurt returns, because they were very clear about this.

Another interesting point was that changing equity or currency exposure was mainly done via overlaying with a hedge, as opposed to exiting positions, because this had lower tax implications. This highlights that having different taxes on assets based on how long they are held, or whether the return is dividends, capital gains, or interest, just increases financial complexity. The more the government tries to favor the kind of investment they like, or more likely increase taxes on areas with less political support, creates more derivatives, more trades, and only helps the middleman. If one really hates how much the average Goldman Sachs employee makes (which somehow represents all Wall Street, if not all 'bankers'), they should stop trying to direct investment via tax policy, and treat it all as ordinary income.