Why don’t more people use a small short overlay + Treasuries instead of just reducing equity exposure?

I keep coming back to the idea that there are better ways to reduce downside risk than simply holding more cash.

For example, imagine a portfolio that’s something like:

• 90% equities
• 10% intermediate Treasuries
• A small (5–15%) short overlay on the broad market using futures or an inverse ETF

The idea isn’t to become net short. It’s just to shave off some beta while keeping most of your capital invested.

In a typical market selloff:

• The equity book loses less because of the short overlay.
• Treasuries often appreciate (assuming it’s a growth scare rather than an inflation shock).
• You have less drawdown and more dry powder to rebalance into equities.

Compared to simply owning 80% stocks and 20% cash, this seems like it could maintain higher expected returns while still reducing portfolio volatility.

Obviously there are drawbacks:

• Short positions have financing/borrow costs (depending on implementation).
• Inverse ETFs have tracking issues over long periods.
• Bonds aren’t guaranteed to hedge (2022 being the obvious example).
• A hedge drags performance during long bull markets.

I’m curious whether anyone here has tested something like this over long periods. Did it improve risk-adjusted returns, or did the drag outweigh the benefits?

Would love to hear from anyone who’s actually backtested or implemented a strategy like this.