Permanent Research
Risk Framework
Last updated: September 2026
Returns are what remain after risk is controlled. These limits exist so the strategy is still alive to compound after its worst month.
Why risk comes first
A 30% drawdown needs a 43% gain to recover; a 50% drawdown needs 100%. The math of recovery is unforgiving, so the framework is built around drawdown tolerance first: how much the account is permitted to lose before the system steps in, measured peak to trough, not month to month.
Standing limits
De-risking rules
When limits are approached, the system acts in a fixed order: first reduce size on new entries, then pause new entries entirely, then stand down existing exposure according to the stop rules. The model cannot override this order. A confident model on a losing streak is exactly the case these rules were written for.
What this costs in good times
Caps and cash reserves drag on returns in strong bull markets. That drag is the insurance premium, paid deliberately. The framework is designed to keep drawdowns survivable, not to win every rally. Both the cost and the payoff are visible in the public ledger and the backtest validation.