Strategies for Managing Market Risk in a Portfolio

As a portfolio manager, you are tasked with managing a diversified investment portfolio for a high-net-worth client. The client's investment objectives include capital preservation and moderate growth, with an emphasis on risk management given potential market volatility. Recently, the client's equity holdings have experienced higher volatility, leading to concerns about the overall market risk in the portfolio.

In your response, discuss the strategies you would recommend to mitigate market risk in the client’s portfolio. Be sure to address various approaches, including asset allocation, derivatives, and other risk management techniques. Include examples of how these strategies can be implemented effectively to align with the client's objectives.